Productivity Commission sets off super stoush but engagement the real answer

The best solution for super, is for an engaged and educated workforce to choose a fund that best suits their needs.

Productivity Commission chair Peter Harris.

The Productivity Commission superannuation report received the expected kneejerk responses, with the industry funds rejecting it and the bank funds supporting it.

These two groups are on either side of the debate about whether superannuation should continue to be part of the industrial relations system where it started.

The PC was directed to look at alternatives, so, whatever its own biases, maybe it was always going to recommend a new system.

The best bit of advice in the sector came from the Murray report which said let’s leave the present system in place until 2020 to see how it’s operating and then make whatever changes are necessary.

In part because they are the incumbents, both sides of the industry debate would prefer minimal changes because, frankly, retirement savings shouldn’t be a political football.

Last year’s tax changes showed people simply go on strike and when you are trying to encourage people to save for their retirement, stability is the best policy response.

Even without the PC’s lifetime default fund, the number of superannuation accounts is actually falling from 33 million in 2010 to 27 million in 2016.

Granted there are too many funds and the PC effectively gave APRA a boot up the backside by saying that it wasn’t doing much of a job weeding out the underperformers.

Those in the system already will, of course, stay under the industrial relations system, it’s only new members who move outside and enter the world of lifetime default funds.

The best solution of all is for an educated workforce that would choose the best fund for their needs but the mere fact that two thirds of the working population now sit in a default fund tells you how engaged they are with the system.

On paper, REST and HostPlus should be winners because they cover retail and hospitality which are the two industry sectors where most people start their working life.

The big industry funds like AustralianSuper, with two million members and $110 billion under management, will survive under any system.

All existing members will still have their funds administered under the award system but clearly if the government makes a change (and it is a big if) then legislation will have to be introduced to take superannuation outside the award system for new members.

Performance should select the new funds and this too should advantage industry funds judging by their track record.

So, despite of the sector’s fears, the best industry funds should be fine.

More importantly their membership should also be fine, particularly if they actually increase their level of engagement.