Competition in the superannuation sector and the introduction of MySuper will help ensure fund members continue to get value for money when it comes to their superannuation fees, according to the Association of Superannuation Funds of Australia (ASFA). The statement comes in response to the Reserve Bank of Australia's (RBA's) submission to the Financial System Inquiry, reported today.
ASFA CEO Ms Pauline Vamos says the RBA is correct to highlight that it's time for a conversation about whether the current fee structure itself promotes efficiency and competitive pressure in the superannuation system.
"But let's not forget that members have more power to exercise choice, of fund and also of where to invest their retirement savings, than ever before," said Ms Vamos.
"Over the past few decades, the superannuation system has evolved from being dominated by a few employer-linked large funds, to a myriad of different choices, which come with a variety of features and different sets of fees. This means members can choose a fund that is best suited to their particular needs.
"In addition, the introduction of MySuper accounts means members have a number of low-fee accounts with simpler features, which they can compare using the product dashboards required for these products.
"Other factors, such as an increase in electronic transactions, digital communication and new products are also helping to drive efficiencies and cost reductions."
ASFA also cautioned against comparing superannuation fund costs in Australia with certain other pension systems of the Organisation for Economic Cooperation and Development (OECD), as the comparison needs clarification.
In particular, in its submission to the Financial System Inquiry, the RBA's comparison:
- omits a number of OECD countries. Average costs are higher
- the estimates of costs in the chart for Canada and Israel are partial, in that they cover only administration or investment costs, not both
- the costs data makes no allowance for differences in asset allocation and type of management. As the RBA notes, Australian superannuation funds have a much higher allocation to growth and alternative assets, which will be more expensive to manage and have offered higher investment returns than investments such as fixed interest, which are more commonly used in other countries.
As the RBA notes, international studies show that fees for public-offer defined-contribution funds in Australia are broadly comparable to fees for equivalent funds in other major developed countries.
"When allowance is made for the characteristics of the superannuation system in Australia, costs and fees are broadly comparable to equivalent products in other major countries.
"It is sound public policy to have a range of funds and investment options provided by the private sector. Such an approach allows for both competition and the better meeting of the needs of individuals, compared to requiring individuals to be a member of one central fund with limited or no investment choices.
"Rather than broad assertions about the need to slash costs, the focus of public policy discussion should be on improving retirement outcomes for all Australians through achieving the greatest net investment return on what is the main form of savings for most Australians," Ms Vamos concluded.
For further information, please contact:
Lisa Chikarovski, Media Manager, 0451 949 300.
ASFA is the peak policy, research and advocacy body for Australia's superannuation industry. It is a not-for-profit, sector-neutral, and non-party political national organisation, which aims to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.