Productivity Commission Report

Today the media began reporting on the Productivity Commission’s final report on super, called “Superannuation: Assessing Efficiency and Competitiveness”. The aim of the Productivity Commission’s investigation was to “assess the efficiency and competitiveness of the superannuation system, and to develop alternative models for allocating default fund members to products”. Christian Super welcomes the report as we know it will help pave the way for superannuation changes that benefit Superfund members both now and in retirement.

The Productivity Commission’s findings include the following key recommendations:

Changes to Default Super when Joining the Workforce/Changing Jobs 

The report recommends that when an individual first joins an employer they be required to either supply details of their existing superannuation fund or their employer would require the individual to select their ‘first Superfund’ from a list of 10 default funds. 

Currently upon joining an employer, an individual has the option of providing details of an existing superannuation fund to receive their superannuation contributions. If they don’t provide these details, the employer must set an account up for the individual with the employer’s default fund. This default fund is selected by the employer and must be a MySuper authorised fund, such as Christian Super.

Outcomes Test 

One of the findings of the Productivity Commission was in relation to the underperformance of some super funds.  Therefore the report recommends that Superfunds be subjected to annual performance tests to ensure that the fund is actually achieving the outcomes which it set out to achieve.  

Christian Super offers five investment options to our superannuation members with a range of investment time horizons to suit members in different stages and with different needs. You can learn more about choosing investment options here. You can also use Money Smart’s superannuation calculator to give you an indication of your possible retirement balance, based on the performance of the option you choose.

The historical performance of each of Christian Super’s investment options relative to their benchmarks are listed below:

As at 30th November 2018 Time Horizon Performance Benchmark Over/Under Performance
Ethical High Growth 10 years 8.5% p.a. 5.6% p.a. +2.8% p.a.
My Ethical Super 7 years 8.3% p.a. 4.9% p.a. +3.4% p.a.
Ethical Balanced 5 years 5.3% p.a. 4.4% p.a. +0.8% p.a.
Ethical Stable 3 Years 4.1% p.a. 3.7% p.a. +0.4% p.a.
Ethical Cash 1 year 1.6% p.a. 1.9% p.a. -0.3% p.a.

 

Automatic Account Consolidation

The Productivity Commission is also concerned about the potential negative impact for individuals who have multiple Superfund accounts. It recommends that accounts under $6,000 that haven’t received recent contributions should automatically be transferred to another Superfund the individual is actively using (if available) or alternatively to the ATO, awaiting collection by the individual at a later date.

We agree that there is generally no reason to have multiple accounts. Having multiple super accounts means an individual pays multiple sets of fees and insurance premiums. This reduces the total amount of money that is invested and thus the overall amount of money available for you in retirement.

In our recent member survey, the majority of Christian Super members reported that they only have one super account. If have more than one account, consider consolidating them – it’s easier than you might think! Click here to learn how, or call us on 1300 360 907.

Fees

The Productivity Commission’s report recommends that all fees charged to superannuation members be limited to cost-recovery only and that advisor commissions be banned. Both of these recommendations reflect what Christian Super already do.

Delay Super Guarantee Increases

The Productivity Commission’s report recommends that the planned increase in superannuation contributions (currently planned to increase to 12%) be put on hold until a broader review is conducted on retirement incomes, considering both the Government Age Pension and Superannuation Savings System.

Insurance in Super

In line with current Government policy, the report recommends that insurance in super be tailored to better target the needs of members.  Specifically, it is looking to eradicate the unnecessary erosion of retirement savings for young members, members with low account balances and members who are not working.

We recently updated our insurance products to make sure our members get the best value out of their insurance. Our new policy specifically addresses some of these issues. Click here to learn more about our insurance changes.

Final Thoughts

Generally speaking we are supportive of the objectives of the Productivity Commission and look forward to contributing to a more efficient and sustainable superannuation system in Australia. We will continue to monitor the developments that follow the release of this report and will adapt as necessary as key recommendations transition from government policy into law.

We have a unique position in the superannuation industry as one of only a few Christian businesses. We strive to be ethical in all of our work knowing we are accountable to our members, the broader industry and most importantly to God, who has commanded us to be good stewards. As Peter encourages us in the Bible, “Always let others see you behaving properly, even though they may still accuse you of doing wrong. Then on the day of judgment, they will honour God by telling the good things they saw you do.” 1 Peter 2:12 (CEV)