Super not so super: Productivity Commission

Article published 1 February 2019

Subscribe to CPSA news

THE Productivity Commission’s final report Superannuation: Assessing Efficiency and Competitiveness into the efficiency and competitiveness of the superannuation industry should be the blueprint for urgent superannuation reform in 2019.

Unless the report’s recommendations are adopted and implemented, superannuation industry snouts will remain firmly stuck in the trough of ordinary Australians’ superannuation savings.

Compulsory superannuation in Australia is now 30 years old. Many Australians have not paid sufficient attention to their superannuation. Understandable, because high finance is not everyone’s cup of tea.

However, this inattention has led to a number of serious and entrenched problems. Super account balances are eroded by excessive fees and also premiums for life insurance that in many cases have proved worthless.

There are funds that are not even trying to do well for their members. They’re there to pay management and directors fat fees.

A lot of those funds are so-called default funds. When employees don’t exercise their right to choose a fund, their employer pays their compulsory super contributions into a default fund chosen by the employer, who has no interest in how well this fund performs.

But the problem of underperforming funds is not limited to default funds. Some so-called choice funds have been slack performers as well, content to rake in contributions but not doing much in the way of quality investing to maximize members’ savings.

A lot of the problems people have to find the right fund for them have been highlighted during the Banking Royal Commission: poor information and poor financial advice.

Here are some of the key recommendations:

-Default superannuation accounts should only be created for members who are new to the workforce. A shortlist of up to ten well-performing superannuation products should be presented to all members who are new to the workforce to choose from.

-All funds must undertake uniform annual outcomes tests for their investment options. Options that fall consistently short must be remediated or withdrawn.

-Funds must consolidate superannuation accounts with balances under $6,000 and 13 months or more of inactivity.

-The Australian Government should require funds to publish simple, single-page product dashboards for all their superannuation investment options.

-All fees charged by funds must be levied on a cost-recovery basis.

-Funds must assess their board’s performance and the performance of individual directors with full disclosure of the results.

-An independent superannuation members’ advocacy and assistance body should be established.

The Productivity Commission’s final recommendation has a bit of a sting.

Before the 9.5 per cent rate of compulsory contributions is raised any further, an independent public inquiry should be held into how much superannuation costs taxpayers in forfeited tax revenue and also if the benefits of superannuation are shared equitably.

On recent estimates, superannuation costs $37.5 billion a year in forfeited tax revenue, while the benefits (people getting less Age Pension because of increased super savings) amount to $34.6 billion.

In other words, the Productivity Commission would like to know whether our superannuation system is worth the trouble.

For more information please email our media contact at

Stay up to date with CPSA news and media releases

Our regular email newsletter provides valuable insights and information on topics such as pension entitlements, healthcare, government policies, and more.

  • This field is for validation purposes and should be left unchanged.