He also said selecting just 10 funds could undermine competition between funds.
“Where you have a system that is proposing that 10 funds be picked, that could have potentially uncompetitive, anti-competitive impacts in terms of those 10 funds receiving the vast bulk of flow of default arrangements.”
Head of advocacy at the Superannuation Consumers’ Centre, Xavier O’Halloran, said the best in show would be periodically updated to add and remove funds, which would “massively” increase competition to get on the shortlist and benefit consumers through lower fees and higher returns.
“It’s something that is only going to drive a good market outcome for consumers,” Mr O’Halloran said.
The commission estimated its proposals to slash the number of unintended multiple accounts for employees changing jobs and weeding out entrenched underperforming funds could help save members $3.8 billion a year and deliver $533,000 in higher retirement income for an employee starting work today.
Treasurer Josh Frydenberg signalled he was more open to the commission’s major recommendations because the “big idea” was for the default system to focus on the member, not their workplace.
“I think there is merit to this idea that the better performing funds are taken up by more members…rather than a lottery,” Mr Frydenberg said on ABC Radio.
“What they are suggesting is that people [new workers] only default once and that is certainly an idea that deserves very serious consideration.”
Boths sides of politics plan to officially respond more fully after the Royal Commission into financial services delivers its fundings on February 1.
Bowen firm on 12pc increase
The 700-page report proposes new ways to stop fee-gouging by funds and contains an implicit warning to Labor to put on hold a scheduled superannuation guarantee rate to 12 per cent, from the existing 9.5 per cent.
Mr Bowen said the superannuation guarantee rate rise to 12 per cent had been delayed for far too long by Coalition governments dating back to John Howard in 1996.
“We can’t afford to wait longer,” Mr Bowen said.
“We need to get the superannuation guarantee to 12 per cent to ensure an adequate retirement.”
“I do not accept arguments that we can just stay at nine and a half per cent.”
The Superannuation: Assessing Efficiency and Competitiveness report led by Productivity Commission deputy chair Karen Chester called for a new independent inquiry into the broader retirement income system before any possible increase in the current 9.5 per cent superannuation guarantee rate.
The proposed inquiry would asses whether the superannuation system set up 27 years ago was achieving its original stated objective of raising national savings – by increasing private savings and taking pressure off the government budget, and if the distributional effects were fair for lower and higher income earners.
The next increase legislated increase in the SG rate to 10 per cent is due to take place in July 2021, before it gradually increases to 12 per cent by 2025-26.
The Coalition officially supports the increase to an ultimate 12 per cent, but it has slowed the rollout rise and philosophically is more circumspect about the government forcing people to set aside more of their income in deferred retirement savings.
Asked about whether Labor would support a retirement incomes system review, Mr Bowen pointed to Labor’s existing policy for the Council of Superannuation Custodians to oversee potential changes to the system.