Superannuation efficiency and competitiveness: Rice Warner’s submission to the Productivity Commission
- On September 22, 2016
In its final report (November 2014), the Financial System Inquiry (FSI) commented that “the superannuation system is not operating efficiently due to a lack of strong price-based competition”.
Amongst several significant recommendations for change in the superannuation industry, it gave notice that more efficiency is needed or a new system of allocating new default fund members into MySuper products would be required, “unless a review by 2020 concludes that the Stronger Super reforms have been effective in significantly improving competition and efficiency in the superannuation system”.
Clearly, it is important to develop a sound mechanism for measuring both competition and efficiency or this review cannot be undertaken objectively. The FSI recommended developing criteria to assess different types of efficiency:
- Operational efficiency – where products and services are delivered in a way that minimises cost and maximises value.
- Allocative efficiency – where the system allocates resources to the most productive use and optimal balance between consumption and savings over time.
- Dynamic efficiency – (including services to members) where the system encourages optimum behaviour by or on behalf of consumers.
Consequently, in February this year, the Treasurer appointed the Productivity Commission (‘Commission’) to conduct a study in two parts, namely:
- To develop criteria to assess the efficiency and competitiveness of the superannuation system.
- To develop alternative models for a formal competitive process for allocating default fund members to products. The analysis will be done in two stages and on Tuesday 2 August, the Commission released its draft report on the first part, How to Assess the Competitiveness and Efficiency of the Superannuation System.
This submission is a response to that draft report.