Super to overtake banking as biggest
THE $1.8 trillion superannuation industry will eclipse the banking sector in the next 20 years with retirement incomes increasing by up to 40% under changes recommended by the Financial System Inquiry.
The report, penned by former Commonwealth Bank chief executive David Murray, suggests a raft of changes to superannuation including the replacement of MySuper with a new system unless it can drastically cut its fees.
From January this year, employers can only pay default superannuation contributions into an authorised MySuper fund - but Mr Murray said the current system lacked competition.
He recommended the introduction of a formal competitive process to add new workforce entrants to MySuper products by auction or tender unless the current process can be proven competitive by 2020.
Mr Murray also recommended funds offer retirement income packages for Australians who wish to convert their super to an income stream, but said there were tax and regulatory impediments that had to first be removed to make the program viable and desirable for fund operators.
"We believe that these two initiatives have the potential to increase retirement incomes by 25 to 40%," he said.
Industry Super Australia chief executive David Whitely welcomed the report for acknowledging the major role superannuation had to play in Australia's economic growth.
He said Australia's economic growth was underpinned by a "safety net of super funds, selected on merit, which protecct the retirement savings of the vast majority of Australians who do not choose their super funds".
"Today the FSI has recommended maintaining a strong selection process for the safety net where super funds are chosen on the basis of long-term investment returns, after fees," he said.
"This will ensure the super savings of millions of Australians remain in good hands."