Superannuation efficiency and competitiveness

16 Mar 2016

This study stems from the Australian Government’s response to the recommendations of the 2014 Financial System Inquiry (the FSI). The FSI found that the superannuation system was not operationally efficient due to a lack of price-based competition in the sector, with the result that potential benefits of scale were not being realised (despite the introduction of MySuper). The FSI recommended a review of the competitiveness and efficiency of the superannuation system by the Productivity Commission (the Commission), to be undertaken in three stages.

The Australian Government, in its response to the FSI, committed to tasking the Commission to review the efficiency and competitiveness of the superannuation system following the full implementation of the MySuper reforms (that is, after 1 July 2017). In the interim, and to inform the review and provide transparency and certainty to stakeholders, the Commission has been tasked to develop the criteria to assess the efficiency and competitiveness of the superannuation system (stage 1 — the study).

The Australian Government has also tasked the Commission with examining alternative models for a formal competitive process for allocating default fund members to products (stage 2). The stage 2 inquiry will involve a separate process and will commence in the second half of 2016. Indicative timelines for the three tasks are shown in figure 1. Both stages 1 and 2 will inform the Commission’s inquiry to review the efficiency and competitiveness of the superannuation system (stage 3).

In this study, the Commission has been asked to develop criteria to assess whether, and the extent to which, the superannuation system is efficient and competitive and delivers the best outcomes for members and retirees, including whether it optimises risk-adjusted after-fee returns.

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