The Association of Superannuation Funds of Australia has criticised the Productivity Commission’s proposed scorecard for assessing the efficiency and competitiveness of the super system, arguing forcing funds to comply with it would drive up member fees.
It has been proposed by the government think-tank the industry adopt a performance reporting structure based on five “system-level objectives”, 22 corresponding assessment criteria, and a suite of supporting performance indicators.
It was detailed in the Productivity Commission’s new report, How to assess the competitiveness and efficiency of the superannuation system, released on Friday November 25, 2016.
The final report represents the completion of the first leg of a three stage research project the government ordered the commission to undertake in response to a series of recommendations made by the David Murray-led 2014 Financial System Inquiry.
“This first stage provides transparency and certainty to the superannuation industry about how it will ultimately be assessed in our forthcoming review of the system’s efficiency and competitiveness,” Productivity Commission deputy chair Karen Chester said.
“Undertaking a system-wide assessment of the competitiveness and efficiency of our super system is complex and novel – it has not been done before. Our assessment framework is comprehensive to capture this complexity,’ Chester said.
The Association of Superannuation Funds of Australia (ASFA) responded with a statement to “express its concern” that the protocols would impose an unnecessary burden on the industry and lead to higher costs being passed on to members.
“Given there are 89 unique indicators and 22 criteria to assess in this framework, ASFA believes it will make it difficult for the commission to draw meaningful conclusions,” ASFA chief executive Martin Fahy said.
“Ultimately, higher data costs for industry are borne by members and the industry is already subject to extensive data reporting and compliance requirements.”
The commission said the majority of the indicators rely on data that already exists in some form and that the framework had been designed, among other things, “to minimise the compliance burden on industry”.
Fahy said 17 of the suggested indicators would require the industry to source new data it does not already collect in order to comply.
Retail fund lobby the Financial Services Council (FSC) welcomed proposed framework calling it “fair and balanced” and tipping the reforms would “deliver lower fees, product innovation and higher returns for consumers”.
“The FSC is pleased that the PC commits to identify the extent to which the current default market is not conducive to competition by incumbent industry funds,” FSC chief executive Sally Loane said.
“In particular, the PC is correct to have called out consistent underperformance by some incumbent default industry funds.”
Loane said she was also pleased the commission had noted the importance of “best-practice fund governance”.