I’m pretty sure that the Murray Report on the financial system will soon be gathering dust on the bookshelves of the relevant ministers. (Can anyone tell me why the government is even bothering to have a tax review; nothing will happen, that’s for sure.) And, Joe, has quite rightly ruled out any change to the GST.)
I’m not sure about Murray’s recommendations relating to bank capital, but most of the superannuation recommendations are well-based, bar the idea that we can wait for the review of MySuper in 2020 before any of the changes are implemented. Was Murray having a lend?
(Mind you, the tax recommendations are off the mark – looks like the influence of the left-wing member of the panel won the day.)
There is absolutely no reason to delay acting on the core recommendations now: take default superannuation out of the industrial relations system; conduct periodic tenders for funds to hold the contributions of those workers who do not make a deliberate choice (a range of funds will be needed; don’t forget that monopolies are bad and things have not gone well in Chile on which this idea is based); and assume that workers stay in the same fund when they change jobs unless there is advice to the contrary. The proposed changes to the governance of the industry super funds (majority independent directors0 are also sound.
There is absolutely no reason to delay any of this.
Here’s the news item from The Fin:
Superannuation funds could be forced to tender for the right to manage hundreds of billions of dollars in retirement savings in an effort to reduce fees for members and remove super from the industrial relations system.
Trustees would also be subject to the same penalties for misconduct as directors of managed investment schemes.
In a scathing assessment of Australia’s $1.9 trillion super system, David Murray, chairman of the Financial System Inquiry, said fund members were paying far too much for super products because retirement funds had failed to pass on potential savings as the size of the industry increased.
Mr Murray added that the panel harboured “reservations” about whether a recent overhaul of the super sector, known as the Stronger Super reforms, would “significantly improve the competitive dynamics and the efficiency of superannuation system”.
He said the package of measures recommended by the panel could increase retirement incomes for a male on average weekly earnings by between 25 per cent and 40 per cent.
The panel recommended that, dependent on the outcome of a review of super to be conducted by 2020, there should be a formal competitive process to allocate new default fund members to no-frills MySuper products.
“This option would stimulate competition in the default market and extend the benefits of wholesale competition,” said the panel. Similar models exist in countries such as New Zealand and Chile.
Under the model recommended by Mr Murray, members would retain their super fund when they change employers, without having to take action. Alternatively, they would be free to select their own fund.
The model, the panel estimated, could increase the balances at retirement by about $25,000 and retirement incomes by up to $1600 a year.
Another benefit of this recommendation is that it would remove super from the industrial relations system and take it out of the hands of employers. Employers would no longer have the responsibility of selecting a fund on behalf of their staff.
Mr Murray also said the objectives of the super system should be enshrined in legislation and that trustees should be required to select a comprehensive income product for members’ retirement.