The Centre for International Finance and Regulation (CIFR) welcomes the opportunity to provide input to the Productivity Commission inquiry into alternative default models for the superannuation industry. This submission makes a few points, but they are vital:
1. The entity that has the responsibility for selecting and monitoring the default provider should be the prime focus, rather than the mechanism by which providers or products
2. Member heterogeneity makes it important to accommodate the ability to tailor, and foster the development of smarter defaults. are chosen. Who chooses matters most; and how they choose should not be dictated by public policy.
3. Market-based mechanisms involving an open tender or auction to manage superannuation for broad cohorts of default members may lead to inefficient outcomes that are at odds with member needs.
4. It is recommended that a new class of private sector entity be established – member agents – that are responsible for the selection and monitoring of default providers. This approach will drive competition from the grass roots in a way that accords with member needs.