Superannuation is primarily a long-term savings vehicle to fund retirement. Australia’s superannuation sector has grown rapidly in the period since the Wallis Inquiry and is an important source of funding for long-term capital formation, which is important for productivity growth. Although the superannuation system has considerable strengths, the efficiency of the system is a significant issue.
The Inquiry has examined the superannuation issues most relevant to the financial system and the economy. In general, it is difficult to separate these issues from Government policy settings because the size and growth of the superannuation system are largely a creation of Government policy. The Inquiry acknowledges that options to address the issues related to the financial system need to take account of the Government’s broader policy objectives.
The Inquiry has made the following observations about the superannuation system:
- There is little evidence of strong fee-based competition in the superannuation sector, and operating costs and fees appear high by international standards. This indicates there is scope for greater efficiencies in the superannuation system.
- If allowed to continue, growth in direct leverage by superannuation funds, although embryonic, may create vulnerabilities for the superannuation and financial systems.
- Superannuation policy settings lack stability, which adds to costs and reduces long-term confidence and trust in the system.