The Financial Systems Inquiry interim report has noted the impact of both frequent policy changes and short-termism on the superannuation sector.
Further it has suggested that the current superannuation policy settings may not stand the test of time.
In its interim report, handed down today, the FSI has observed that the "superannuation policy settings lack stability, which adds to costs and reduces long-term confidence and trust in the system".
"Constant change in superannuation and retirement income policy settings imposes costs on superannuation funds, which are ultimately paid by members. As superannuation is a long-term savings vehicle, change can also undermine confidence and trust in the system," it said.
It said that to ensure policy stability, the system needed to achieve, and be seen to achieve, its objectives efficiently and equitably, and the fiscal cost needs to be sustainable.
"Some evidence casts doubt over whether current policy settings will stand the test of time," the interim report said.
The report has also raised the controversial issue of borrowing within superannuation, observing that, "if allowed to continue, growth in direct leverage by superannuation funds, although embryonic, may create vulnerabilities for the superannuation and financial systems".
"The general lack of leverage in the superannuation system is a major strength of the financial system. Although direct leverage in superannuation is small, the current ability to borrow directly may, over time, erode this strength and create new risks to the financial system," the report noted.
It said that, on this basis, "the Inquiry would value views on the costs, benefits and trade-offs of the following policy options or other alternatives:
"Restore the general prohibition on direct leverage in superannuation on a prospective basis".
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Superannuation funds have thrown their support behind the QAR reforms but want a “clear statement” that they will not be required to check all member SOAs.
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