RELEASE
http://trusteetailored.com/
Australia’s superannuation system is short-changing 15 million MySuper fund members nest-eggs around $5 billion in retirement savings – more than four times higher than Productivity Commission estimates, according to Douglas Bucknell, Managing Director of Tailored Superannuation Solutions.
Appearing at the Public Hearings in Sydney today on the Productivity Commission’s draft Report on Superannuation, Mr Bucknell said that "Smart Default" products could increase average retirement balances by more than 35% over the working life of MySuper fund members - equivalent to around $5 billion per year. This smart default approach has been tested with a number of Australian MySuper funds and the average increase of 35% in retirement outcomes has been shown each time to be achieved.
Such a boost to retirement savings through ‘Smart Defaults’ would have significant public policy benefits by reducing the growing future dependence of retirees on Australia’s struggling age pension system.
Mr Bucknell said that the Productivity Commission had estimated possible efficiency gains of about $1.3 billion through adoption of its proposed ‘Best in Show’ system of channelling MySuper members into 10 leading superannuation funds.
However, this approach totally ignored the huge additional and proven dynamic efficiency gains from Smart Defaults - which while enabling members to remain with their chosen super fund, would ensure their contributions were allocated to tried and tested investment options based on simple known factors of age, contributions and current superannuation balance.
According to Mr Bucknell, this tailored approach to each member’s profile was no different to what financial planners do for their clients, or what happens to superannuation fund members who choose their own investment option.
"MySuper members put their faith in their Trustees to invest wisely on their behalf, yet Trustees have fallen short on their duties. Our analysis shows that applying tailored investment options would lift average retirement balances for these members by 35% with reduced risk of loss as retirement approaches."
"The Productivity Commission has made an accurate diagnosis of the shortcomings of Australia’s superannuation system, but the ‘Best in Show’ remedy proposed is flawed", said Mr Bucknell.
"A Best in Show solution is bureaucratically-driven, rather than market-driven, and would simply create an oligopoly of a few powerful superannuation funds that would choke off competition. As we have seen in the Banking Royal Commission, powerful oligopolies lead to poor corporate cultures, gross mismanagement and lack of proper regard for the interests of customers (or super fund members)."
"Smart Defaults would allow competition between funds to flourish through product differentiation. Vigorous competition based on retirement outcomes should decide which funds survive, not a highly contentious process which would create huge barriers to entry, stifle innovation and – most importantly – fail to advance the financial retirement interests of members", said Mr Bucknell.
Mr Bucknell foreshadowed that his company would be making a detailed written submission on the Productivity Commission’s draft Report, and would be pleased to have the Commission audit its analysis of the member-by-member benefits of Smart Default products.
