Superannuation is the largest financial asset many Australians have after the family home. Millions of Australians rely on their superannuation to provide income in retirement. The superannuation system has accumulated over $2 trillion in assets, making it the second largest part of the financial system.
It is critical that the superannuation system is competitive, efficient and transparent and has the highest standards of governance. Australians must have confidence to invest in this system and plan for their retirement. By providing retirement incomes for millions of individuals, the superannuation system encourages greater self-reliance.
We will enshrine the objective of the superannuation system in legislation. This will help align policy settings, industry initiative and community expectations.
There is scope to improve the performance of the superannuation system in a number of areas. The system is fragmented, costly, complex and suffers from a lack of member engagement. Increased member engagement could improve member outcomes broadly, including putting downward pressure on fees and improving after-fee returns. In the retirement phase, the development of new income stream products can better protect retirees from longevity and other risks. Governance can be improved and conflicts of interests can be better managed.
We have already introduced legislation to improve governance in superannuation, committed to enhance transparency of information and to improve competition in superannuation, but more needs to be done. We will implement a number of changes which build on existing commitments to boost efficiency and competition.
We will immediately task the Productivity Commission to develop and release criteria to assess the efficiency and competitiveness of the superannuation system. We will also immediately task the Productivity Commission to develop alternative models for a formal competitive process for allocating default fund members to products. Subsequent to the development of criteria and following the full implementation of the MySuper reforms, we will task the Productivity Commission to review the efficiency and competitiveness of the superannuation system. We will also explore additional measures to improve the efficiency and competitiveness of the current system.
We will develop legislation to allow trustees of funds to provide pre-selected retirement income products to help guide members at retirement and improve outcomes for retirees, including through increased private retirement incomes, increased consumer choice and better protection against longevity and other risks. We will also continue our work to remove impediments to product development.
Specific measures:
- By end-2015:
- Develop legislation to improve governance and transparency in superannuation. Progress the Retirement Income Streams Review. Task the Productivity Commission to immediately develop and release criteria to assess the efficiency and competitiveness of the superannuation system and to develop alternative models for a formal competitive process for allocating default fund members to products.
- By end-2016:
- Develop and introduce legislation to enshrine the objective of the superannuation system. Consult on legislation to facilitate trustees of superannuation funds providing pre-selected comprehensive income products for retirement.
- Beyond 2016:
- Implement legislation to introduce director penalties. Consult on legislation to improve member engagement, consistent with the recommendations in the Inquiry. Monitor leverage and risk within the superannuation system.