National Seniors Australia chief executive Michael O’Neill said the review’s emphasis on increased transparency and greater choice would boost consumer confidence. “An overhaul is well overdue,” he said. “As it stands, the superannuation system is industry-oriented, difficult to navigate and plagued by trailing commissions and hidden fees.” He said with research showing $40 billion in commissions had been lost to superannuation accounts since 1996, the promise of reduced fees was welcome for current and future retirees. However, a greater focus on dispute resolution was needed, with polling showing significant dissatisfaction with the Superannuation Complaints Tribunal. The Combined Pensioners and Superannuants Association welcomed the report, but said more needed to be done for those most in need. “People with broken workforce patterns, including casual or part-time workers, as well as those with caring roles or who fall ill, are disadvantaged because they cannot accumulate enough superannuation in time for their retirement,” policy officer Antoine Mangion said. “Though the proposed reforms will benefit these groups to some extent, they will still be behind the eight-ball.” A COMPULSORY superannuation system based on informed investors making rational choices fails to recognise the reality of the Australian market, the final report of the Cooper Review into Superannuation has said. Instead, the review’s recommendations aim to create a system which will allow disengaged consumers to still achieve good superannuation outcomes, while offering choice for those who would like more control over their superannuation funds. Implementation of the recommendations would result in fee cuts of about 40 per cent in the long-term for the average member, and lift their final superannuation balance by about $40,000 after 37 years in the workforce. The report cited 2006 research which showed 70 per cent of Australians who completed a problem-solving exercise did not achieve the level of numeracy required to meet the complex demands of an information-based society. While disclosure has previously been seen as a key regulatory control for superannuation, it’s effectiveness is limited by a lack of comprehension and interest among many members. Because compulsory contributions did not come directly from members’ pockets, people were also much less price aware. The review said the “back office” of the superannuation system was in urgent need of an overhaul and cost members hundreds of millions of dollars more than it should each year, while fees had not been reduced in line with what could have been expected based on economies of scale as the system matured. The review recommends a MySuper default superannuation option which would cater for the 80 per cent of fund members currently in their default fund option. “If members are not interested, then the system should still work to provide optimal outcomes for them,” the report says. “MySuper is designed with two large groups of members in mind: those who take no real interest in their super, and those who choose to be in a large, low-cost and well-managed product where the investment strategy is designed and implemented by the trustee.” A choice component would allow those who were interested to tailor their superannuation with graduated degrees of responsibility and engagement. Other key recommendations include the SuperStream package of measures designed to bring the back office administration into the 21st century, and measures to improve trustee governance and standardise investment performance reporting.
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