The Changing Superannuation Landscape

The Australian superannuation industry has in recent years been characterised by limited consolidation, short term yearly relative return comparisons and a race to lowest fees not best outcomes.

This has been driven by legislative, regulatory and structural issues including the introduction of MySuper.

That has now changed:

  • As highlighted by the Productivity Commission Finding 4.3, trustees can do better with well-designed life-cycle products
  • As demanded by the Royal Commission, trustees must act – not continue to delay
  • As required by the introduction of the Outcomes Test, trustees must test and compare the design of their default option.

The drivers are now focusing on the (retirement) Objective of Superannuation. As the graph below indicates the benefits per average MySuper member from recent government reforms including Superstream, consolidation/mergers/scale can be completely outweighed by the benefits available from tailoring investment options using TTS.

In fact those benefits outstrip average total yearly fees, highlighting that the race to lowest fees is a classic case of ‘missing the wood for the trees’.

The change to a long term outcome focus, rather short term relative returns is supported by:

  • The Productivity Commission findings
  • The Royal Commissions Report
  • The regulator’s Outcome Test
  • The Murray Financial System Inquiry

They all encouraged greater innovation, productivity improvement and trustee accountability within the superannuation system.

It’s time for MySuper trustees to get on with implementing.