The removal of impediments to the creation of retirement income products should not go ahead until there is greater consensus on what purpose the superannuation system serves, David Murray has revealed.
In talks with Investment Magazine at the offices of Australian Securities and Investment Commission in Sydney, the day after the release of the interim Financial Services Inquiry report, Murray said changes done without consensus would not be durable and could damage faith in the system.
The comments follow a largely damning report for the superannuation industry – being critical of the worth of active management, the general level of fees and calling into question the worth of franking credits and tax breaks for the highest earners.
Murray said the system lacked a common objective. “If it is a retirement income system rather than a savings accumulation system where does it sit in relation to the age pension?” he asked and referred to the report’s suggestion that longevity risk for individuals could be managed by the government.
The interim report recognises the regulatory and policy impediments to developing income products with risk management features that could benefit retirees, but Murray has said these changes would have a fiscal impact that would be open to political differences and continual change.
“A commonly accepted purpose and philosophy is a prerequisite to stability in the system, which is a prerequisite to confidence,” he said.
His words will disappoint the Association of Superannuation Funds of Australia which has called for urgency in creating a suite of retirement products to meet the needs of the large bulge of members entering retirement in the next few years.
Murray confirmed the priority he would give to superannuation in the inquiry’s final report to be delivered in November.
“Superannuation assets are growing so fast in that system, that before we know it it will be half the system,” he said. “If that is not working well then the financial system is not working well.”
Murray is seeking further evidence around the questions raised in the interim report, before making his recommendations.