Outlook Conference: Labor worried about super ‘best in show’ plan
Chris Bowen fears “unintended consequences” in PC proposals to set up a list of the country’s top performing super funds.
Opposition treasury spokesman Chris Bowen has laid out his concerns about the Productivity Commission’s central recommendation to shake up the $2.7 trillion superannuation sector in the interests of savers.
Mr Bowen, speaking at the Melbourne Institute/The Australian Economic and Social Outlook Conference, said Labor foresaw “some unintended consequences” about the commission’s proposal for a single top 10 “best in show” list of the country’s highest performing super funds based on a range of metrics.
“We do think that is something that we have expressed some concern about,” Mr Bowen said. “It is a big call to have 10 best in show funds. I think that would have some competitive impacts.”
The union-and-employee-backed industry fund sector has complained about the PC’s recommendation that default super arrangements be broken from the enterprise bargaining system and that the Fair Work Commission’s role as arbiter of the default super allocation be scrapped for an independent panel of experts.
Productivity Commission deputy chairman Karen Chester, who led the department’s landmark review of the super system, told the conference she would be closely watching the last public round of hearings for the financial services royal commission before handing down the final report for the review of the super system.
“This is a once in a lifetime, for me in a public policy sense, to have planets align where you have the bookends of the Productivity Commission’s report on the financial system, the Productivity Commission report on super, looking at the public policy architecture and the evidence base, and all of that feeding into and informing a royal commission,” Ms Chester said.
“You can see that from the comments made by counsel assisting the commission, Michael Hodge, QC, and indeed by Commissioner Kenneth Hayne in his interim report, that they had benefited from the work and the heavy lifting that we’ve done in an analytical sense to inform their endeavour,” she said. “Likewise, our work has been informed by theirs. The hearings on super -- and indeed the last two weeks of hearings on public policy -- we will be watching very closely before finalising our report.”
Ms Chester said the PC would be considering all the feedback on the recommendations from the draft report into the super system, which found super funds were often acting in their own interest and not those of savers, and were derailing decent nest egg balances at retirement through high fees and failing to merge where it would be in members’ interests.
“People can tell us what we got right and what we got wrong. We didn’t miss too much,” Ms Chester said. “All I can really say is that we, like a Darwinian man, do evolve.”
Mr Bowen also said Labor was still committed to increasing the super guarantee to 12 per cent, up from its current rate of 9.5 per cent.
“Nine-and-a-half is not adequate. We need 12 for adequacy,” Mr Bowen said.
“I am interested in the health of the superannuation sector as a whole. Funds that aren’t performing… that is a matter for them to communicate to potential clients,” he said.
Mr Bowen said the PC’s recommendations, which will be made in a final report due by the end of the year, would need to be considered by the government of the day “side-by-side” with the royal commission’s final report, due in February 2019.
Mr Bowen declined to comment on whether for-profit retail funds should be banned from the industry. The PC earlier this year found that high fees were the main cause of the retail super sector’s entrenched underperformance, which sucked the ability for savers to amass decent retirement balances. The royal commission revealed major vertically integrated wealth managers were conflicted by failing to require decent standards of performance while at the same time handing over unnecessarily large fees for subpar products.
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