The Financial Services Council (FSC) has thrown its weight behind further superannuation funds mergers and consolidation, pointing to the degree to which fewer, larger funds would drive down fees.
Drawing on research from actuarial consultancy, Rice Warner, FSC acting chief executive, Andrew Bragg, said the FSC had included the findings in its submission to the Senate Economics Inquiry into the Superannuation Legislation Amendment (Trustee Governance) Bill.
He said that the report showed that increasing scale in super through mergers and raising competitive tensions would reduce fees.
The FSC is strongly supporting the Government’s legislation which would impose a minimum three independent directors on superannuation fund boards and is also calling for the opening up of the default funds under modern awards regime to be open to all eligible MySuper funds.
Bragg said the research by Rice Warner for the FSC demonstrated that larger super funds with a minimum fund size of $5 billion would result in an average of 0.95 per cent in fees, 0.15 per cent less than the current average of 1.1 per cent.
Bragg said average industry fees could fall by as much as 0.25 per cent, to 0.85 per cent if the minimum size of a superannuation fund was $20 billion.
According to the Rice Warner research cited by the FSC, it was calculated that the average 20-year-old woman who was a member of a small, inefficient fund managing less than $1 billion could be $55,000 better off at retirement if their fund merged with a larger, more efficient fund.
“Fees have been reduced with the introduction of the new MySuper default funds, but Australians will be much better off in retirement with a more competitive superannuation system,” Bragg said.
“More reform is needed for super to meet its purpose. If we get the market structure right, super can alleviate increasing pension and aging costs through higher retirement savings.”
