Superannuation of the future could be very different in Australia
As many as 10 million super accounts are believed to be unintentional multiple accounts or ‘lost’ super.
In the context of the Royal Commission into banking and financial services having the potential to totally change the superannuation landscape, the Productivity Commission’s report into the industry this week was more important than usual.
In simple terms the Commission wants the Australian Tax Office to run an online portal that would automatically combine active accounts, ending the current system in which many workers have several funds that together increase fees and insurance costs.
Indeed as many as 10 million super accounts are believed to be unintentional multiple accounts or “lost’’ super.
With 470,000 new entrants to the workforce each year, 1.6 million people changing jobs or re-entering the workforce and 220,000 switching super funds voluntarily, the stakes are really significant for the industry.
The report also recommended an end to the current system of picking default funds through the Fair Work Commission, to be replaced by a list of options judged to be the best performing funds by independent criteria.
Funds would be judged on performance and fees rather than on whether they are not-for-profit industry funds or retail funds run by the big banks and other financial services companies, with individuals able to select a self-managed fund or another fund if they want to.
All of which should be good for consumers given the number of poorly performing funds with high fees, although it does show that the easy days are over for the funds management companies and even the industry super funds.
Whatever decision is finally arrived at, we can probably look forward to a period of significant consolidation in the sector.