The Productivity Commission has released a major report into Australia’s superannuation system. These are its recommendations.
- Employees should only ever be defaulted into a superannuation accountif they are new to the workforceor don’t have an existing account.
- Employees without a superannuation account should be presented10 “best in show” fundsto choose from within 60 days. If no choice is made after that time they will defaulted into one of these 10.
- The “best in show” super funds shortlist will be judged by an independent expert panel to ensure they deliver the best outcomes for their potential members.
- All APRA-regulated super funds to undertake an annual outcomes test for their MySuper and choice offerings to be measured against clear benchmarks. When a fund falls short of these benchmarks over eight years, members are to be remunerated or, if remuneration isn’t possible, transferred to better funds, overseen by APRA.
- All superannuation accounts with a balance less than $6000 or inactive for 13 months or more are to be consolidated into one account by the ATO and APRA to ensure the money goes to the right individual.
- The Australian government should require superannuation funds to publish simple and digestible dashboards for consumers to compare metrics. These dashboards will be published by ASIC.
- ATO will provide links to the dashboards through its online service.
- The Corporations Act 2001 is to be amended to ensure the term “advice” clearly refers to “advice that takes into consideration personal circumstances”.
- The Australian government should evaluate all its financial literacy programs so as to better target funding to these programs and maximise their effectiveness.
- The Australian government should reassess the benefits, costs and design of the Retirement Income Covenant, a code that states super funds must continue to work in a member’s interest after they retire.
- ASIC and the Department of Human Services should display on their financial literacy websites useful information for “pre-retirees” – over 55s.
- The Australian government should introduce stronger safeguards for consumers in self-managed super funds, such as the requirement for specialist training for those providing advice.
- The Consumer Data Right – the guiding principle behind the Open Banking initiative – should be rolled out to the superannuation sector.
- The Australian government should place a ban on all trailing financial adviser commissions as soon as possible and require all fees charged by super funds to be levied on a cost-recovery basis.
- Insurance through superannuation to made opt-in for those under the age of 25, or for accounts where no contributions have been made for 13 months.
- APRA should require all trustees of super funds to articulate and quantify the balance erosion trade-off determination they have made for their members.
- The Australian government should implement a binding and enforceable superannuation insurance code of conduct through APRA and ASIC.
- The Australian government should commission an independent public inquiry into insurance provisioned through superannuation.
- APRA should amend its prudential standards to provide greater prescription to how super fund trustees are to be regulated.
- All mergers between funds should be disclosed as soon as superannuation providers enter an agreement to merge.
- Superannuation fund mergers are to be given relief from capital gains tax liabilities.
- The definition of a superannuation trustee to act in a member’s best interest should be amended to be clearer.
- APRA should focus more on matters relating to licensing and authorisation, to ensure high standards of system and fund performance.
- ASIC should focus more on the conduct of superannuation trustees and financial advisers as well as the appropriateness of products.
- The Australian government should clarify both ASIC’s and APRA’s roles, suitabilities, and strengths when regulating the super sector.
- The Australian government should immediately initiate an independent capability review of APRA to audit the authority’s efficiency and effectiveness.
- The Australian government should establish a superannuation data working group comprised of APRA, ASIC, the ATO, the Bureau of Statistics, and the Commonwealth Treasury to identify ways to improve the collection and publication of superannuation-based data.
- An independent member advocacy body should be established.
- The government should require APRA and ASIC to produce a “State of Superannuation” report every two years; commission an independent inquiry into MySuper and choice evaluated outcomes every five; and once a decade commit to a full public inquiry into the superannuation industry.
- The Australian government should commission an independent public inquiry intothe role of compulsory superin the broader retirement income system.
- The Australian government should create a new steering group to oversee the recommendations of the report.
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