THE flaws in Australia’s superannuation system go beyond the key issues highlighted by the Productivity Commission, the region’s federal member of parliament says.
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Member for Bendigo, Lisa Chesters said one of the biggest problems faced by workers in her electorate – particularly in contract-based industries – was employers who weren’t making contributions.
“For me, this is another version of wage theft,” she said.
She said the repercussions for employers who failed to pay superannuation were not severe enough, and did not ensure employees received what they were owed.
“This is money they’ve stolen off their workers… It should be paid," Ms Chesters said.
“The Australian Taxation Office needs the resources to enforce it.”
In its draft report on superannuation, released earlier this week, the Productivity Commission recommends the ATO have stronger powers to penalise non-compliant employers and recover unpaid contributions.
Unpaid superannuation was identified as a ‘significant cause’ of losses to members – an issue the commission attributed to about five percent of all superannuation guarantee contributions, valued at a minimum of $2.85 billion a year.
Low income and young workers were identified as the hardest hit by unpaid super.
The commission drew comparisons between the $2.6 trillion ‘super system’ and an ‘unlucky lottery’ in its 571-page report.
“The system is working well for many members, but not for all,” Productivity Commission deputy chair, Karen Chester said.
It was found that too many superannuation members were receiving subpar returns.
Unintended multiple accounts and ‘entrenched underperformance’ were the two key structural flaws at the heart of the report.
A third of all superannuation accounts – about 10 million – were found to belong to people who had at least one other superannuation account.
The commission calculated the cost of unintentional multiple accounts at a total of $2.6 billion a year.
Underperforming funds could leave retirees with almost to 40 per cent less to spend, according to the report.
Proposed solutions included ensuring default superannuation accounts are only made once per employee, and employees get a choice of a selection of high-performing funds.
The ‘best in show’ products would be selected by an independent and expert panel, according to the commission.
Its findings highlighted opportunities to improve the governance of super funds and make the system simpler and safer for all Australians.
The deputy chair of the Productivity Commission said fixing the key problems of unintended multiple accounts and underperforming funds would lift retirement balances for members across the board.
“Even for a 55-year-old today, the difference could be up to $60,000 by the time they retire,” she said.
“For today’s new workforce entrant, they stand to be $400,000 ahead when they retire in 2064.”
Ms Chesters, the Member for Bendigo, echoed the Productivity Commission’s concerns about unintentional multiple accounts and poorly performing products.
She encouraged people to look at who they had their superannuation with, and whether they were getting the best possible return.
“The principle [of superannuation] is still right,” she said.
“What we’ve got to do is close the loopholes.”
The Productivity Commission has invited responses to its draft report.
Written submissions can be lodged online or by post, and will be open until July 13.
The document below details the scope of the inquiry, as well as a summary of the draft findings and recommendations.
- Do you have a story to share about superannuation? Contact us at addynews@fairfaxmedia.com.au or call the newsroom on (03) 5434 4470.