Productivity Commission reveals blueprint to reform superannuation and restore retirement savings

YOUNG workers are facing a massive $400,000 shortfall in their retirement savings, according to a landmark new report. Here’s why and what is being done to fix the problem.

YOUNG workers face a massive $400,000 shortfall in their retirement savings because they are “bamboozled” by a superannuation system rife with bad deals and costly fees.

But even working Australians in their 50s could add as much as $60,000 to their super under a plan to fix the $2.6 trillion system, which the Productivity Commission says is an “unlucky lottery”.

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The commission’s landmark report, released today, reveals 10 million superannuation accounts — a third of all accounts — are unintended double-ups, costing workers $2.6 billion a year in fees.

The average person with two super accounts is $51,000 worse off by the time they retire.

Australians are also being dudded by 20 underperforming super funds, which hold 4.6 million accounts and $197 billion in assets. By automatically being forced into poor default products, retirement savings are drained by 36 per cent.

The commission’s draft reform blueprint focuses on banning companies automatically creating new super accounts for their workers, causing the unnecessary double-ups.

Instead, new workers would be presented with an independent list of 10 high-performing super funds to help them find a good deal.

Nichola Tulley, 22, works in real estate and as a nanny, and said while she found super “a bit confusing”, she had made an effort to keep the same account when changing jobs.

“I know some of my friends aren’t really even aware of what it entails. But it’s definitely something I think about a lot because it’s what you need when you’re older,” she said.

Nichola Tulley says she has made an effort to keep the same super account when changing jobs. Picture Jay Town.

The commission slammed “zombie” insurance policies that some workers can’t even claim on, and called for an independent probe into products many workers do not realise they are being charged for by super funds.

With Australians slugged $30 billion in super fees every year, the commission also called for a review of exit and switching costs, with the typical worker losing $100,000 by retirement if fees increase by just 0.5 per cent.

Commissioner Angela Mac­Rae said workers should be able to organise their savings without being “bamboozled” by more than 40,000 products.

Fewer than 10 per cent switch each year, prompting the commission to push for super funds to publish single-page product descriptions to help people shop around.

The Turnbull Government announced major superannuation reforms in last month’s Budget, including automatically reuniting workers with their inactive accounts, capping fees for low-balance ­accounts and making insurance policies opt-in.

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Twitter: @tminear

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