Since the introduction of compulsory superannuation, we have seen developments that would have surprised many at the time. The self-managed super funds sector has grown, there has been a decline of corporate superannuation funds, many defined benefit schemes have closed, and there has been a massive expansion of investment choice due to the growth of master trusts and platforms.
Since then, our pool of superannuation savings has kept growing, and account balances are likely to rise as the system matures.
So, as our baby boomers retire from the workforce and the proportion of funds in the drawdown stage grows, what does the future hold for superannuation?
As ever, we can be sure of change. The rate of growth in the system, for instance, will be subject to market fluctuations and there will be other, unforeseen developments in the way the industry operates. Building on the strengths of the current system will be vital.
This government wants the best outcomes for Australians in retirement.
A strong superannuation system will also be good for the Australian economy.
We will achieve this by helping build a system that fosters engagement and competition but protects the disengaged; by ensuring that funds are well run so the public can be confident their contributions are being managed effectively; and by encouraging the system to focus more on retirement incomes.
These objectives are reflected in our wide-ranging reform agenda.
We want to shift the focus of the system to the retirement phase. In particular, we want to facilitate better retirement products that allow retirees to boost their living standards. As part of this process, the government expects to announce the results of its retirement income streams review and progress work on comprehensive income products for retirement.
Superannuation is no longer a “cottage industry”. Funds are now large and complex businesses that compete for savings. Despite this, governance standards in the superannuation sector are lower than other prudentially regulated sectors, and even non-prudentially regulated ones. Good governance is fundamental to this outcome, and independent directors are a fundamental part of good governance. Requiring trustees to have an independent chair and at least one-third independent directors would benefit not only the members, but the funds themselves. It would show Australians that their superannuation is being managed to the highest standards – because confidence and trust are vital for long-term investments like superannuation.
The government also wants to make the system more responsive to members in the future. For people who take an active interest in superannuation, the government wants to improve choice and boost transparency. We released legislation to ensure all enterprise agreements allow for individual choice, which we estimate will make it possible for an additional 800,000 workers to compare and choose their fund. We also announced that we will improve transparency through disclosure of portfolio holdings and through requiring dashboards for “choice” products, which will make it easier for members to choose between different products and investment options and to see where their funds are invested.
But we also recognise that many people won’t be as engaged with their superannuation, which is why we announced that we will explore measures to improve competition and efficiency in superannuation. We announced that the Productivity Commission will assess the efficiency and competitiveness of the system and develop alternatives to the current default fund arrangements for consideration by government. This is all part of our efforts to maximise efficiency and after-fee returns, especially in parts of the industry where there is a lack of strong consumer-driven competition.
We are also interested in improving the efficiency of the system by reducing multiple accounts and more effectively returning lost super to members.
I look forward to working with the industry and other stakeholders so that we can together create a better system for the years ahead; a system that leads the world.
Kelly O’Dwyer MP is Minister for Small Business and Assistant Treasurer