Industry Super Australia (ISA) has mounted a strong attack against the processes being pursued by the Productivity Commission (PC) and is arguing that competition does not improve outcomes for members, but has instead been used to sell a growing number of members into poor performing products.
The ISA has used its submission to the PC’s Inquiry into Superannuation Competitiveness and Efficiency to argue that a key regulatory impediment to increasing the efficiency of the superannuation system “is the ease with which members can be allocated or sold-into poor quality choice and [self-managed superannuation funds] SMSF products”.
It said this could be remedied by having product providers prohibited from soliciting members unless “they can reasonably demonstrate such members would be better-off in terms of net retirement income if they left their existing default fund”.
The ISA also claimed the situation could be remedied in part by allowing the revised award default selection process under the jurisdiction of the Fair Work Commission (FWC), “so ensuring that only the best performing and industrially-relevant funds are named in awards”.
However, on the question of the PC’s focus and terms of reference, the ISA submission left no one in any doubt about the industry fund organisation’s views, stating: “The commission’s pre-occupation with competition is further reflected in the issues paper’s relative neglect of issues pertaining to the choice and self-managed fund sectors”.
“Given that these segments routinely under-perform default funds, and so constitute the most inefficient parts of the superannuation system, this apparent disinterest is both striking and of considerable concern,” the submission said. “It is further reflected in the list of published indicators that the commission now intends to measure.”
“An important issue that could be usefully explored by the commission is how and to what extent funds utilise choice products and options as part of their marketing strategies to maximise revenues and profits,” it said. “This would contextualise product/option proliferation and advice-driven sales – not as evidence of contestability and competition – but as indicators of how for-profit funds extract value from the system as the core aim of their business model.”