According to former Reserve Bank Governor, Bernie Fraser, there is “logic” to a controversial proposal to create an official shortlist of the top Australian super funds which would help weed out non-productive funds and improve returns for some members.
Mr Fraser also agrees with the Productivity Commission that the official Australian super shortlist should include more than 10 funds. This would prevent “unfairly discriminating” other funds that are currently serving members well.
He added that there was a “significant minority” for whom the $2.8 trillion superannuation system was not working. During this time of bitter arguments over proposals concerning Australian super, he suggests that the guiding principle should be what is in the best interests of its members.
Australian super system shake-up could save you more than $500k – Productivity Commission
In a damaging report last week by the Productivity Commission, they recommended a broad restructuring of the current super system that could save a new job entrant more than $500,000 over their working life.
The Productivity Commission report also recommended employees should be offered a “best in show” list of the top 10 performing Australian super funds at the start of employment.
According to the Sydney Morning Herald, Mr Fraser said the proposal would help some savers because it would mean that a member could only be defaulted into a relatively high-performing fund.
Mr Fraser added, “In logic, that has some appeal. My criteria is, does this improve the prospects for members or the interests of members? And I think it probably does.”
In addition, he stated that the proposed shortlist would pressure poor-performing retail and industry funds to merge with rivals or be wound up.
However, former Labor Minister and now industry adviser, Nick Sherry, is unconvinced by the shortlist proposal. He says that it would “destroy” funds that did not make the cut. While he agrees that the Productivity Commission has identified the right problems, he was not convinced by its recommendation for a top 10 Australian super fund list. He is in favour of forcing out low-returning funds and automatically merging members’ multiple accounts.
Read more of this story at The Sydney Morning Herald.
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