Australians could retire with more than $500,000 extra in superannuation if the federal government revamps the $2.8 trillion sector, according to a landmark report.
But the superannuation industry is worried some proposed changes could undermine the strength of the nation’s retirement savings system.
Revoking the licences of superannuation funds that persistently underperform is among advice in the Productivity Commission’s report, tabled in parliament on Thursday.
The report also recommends Australians only be offered a default superannuation fund when they first join the workforce.
Beyond that, the commission says employees should be given a list of the 10 best superannuation funds to choose from when they start a new job, as chosen by an independent expert panel.
Such changes could help someone joining the workforce today earn $533,000 more than they otherwise would by 2064.
Treasurer Josh Frydenberg says the report – three years in the making – shows the superannuation system is serving Australians reasonably well but has significant structural flaws.
The government will not make its final response to the report until it’s received the findings of the banking royal commission in February, which looked at the conduct of super funds and how they’re regulated.
But Mr Frydenberg said there was merit in the idea of getting more Australians into funds that were performing well, with the current system creating a “lottery” of results for new members.
“We want to put the interests of members first,” he told reporters in Melbourne on Thursday.
“I’m not interested in the politics of the superannuation industry. I’m interested in the benefits that flow to members.”
He said the report supported many of the government’s proposed changes to superannuation currently before parliament and urged Labor to back them.
But the Association of Superannuation Funds of Australia is disappointed the commission continues to recommend a “best-in-show” list of funds, believing it risks reducing competition.
The Australian Institute of Superannuation Trustees isn’t pleased with the idea either, saying it would deny default status to 90 per cent of funds.
“A top 10 default list is a blunt mechanism that will be needlessly disruptive,” AIST chief executive Eva Scheerlinck said.
Shadow treasurer Chris Bowen is also concerned about the best-in-show list, saying it needs to be looked at further.
On the government’s already-proposed changes, Mr Bowen said Labor was ready to negotiate last year but legislation wasn’t put to a vote in the Senate.
Consumer advocacy group Choice said the report was a “clarion call” for politicians to fix the outdated system.
The Productivity Commission has also recommended the government grapple with the high number of unintended multiple accounts Australians hold.
About a third of accounts, or 10 million, are accidental multiples.