The Productivity Commission (PC) needs to broaden its view of the competitive elements playing on the superannuation industry, including both the insourcing and outsourcing of elements such as administration and investment management, according to the Association of Superannuation Funds of Australia (ASFA).
In a submission responding to the PC's draft report on the efficiency and competitiveness of the superannuation industry, ASFA has pointed to the amount of insourcing and outsourcing which has occurred within the superannuation sector in recent years.
It said that within the superannuation system, there existed a (wholesale level) supply chain that comprised different types of products and services that were sourced by fund trustees such as administration, custodial, investment services, and asset consulting.
"Contestability within each of these provider markets arises from the threat of new providers entering the market, and at the wholesale level from the threat of funds insourcing particular functions," it said pointing out that superannuation funded insourced functions for various reasons such as generating quality improvements, cost efficiencies and better outcomes for members.
The ASFA submission pointed out that there had been numerous examples of insourcing over recent years:
The submission said the PC's indicators had not explicitly incorporated decisions made by funds around insourcing and outsourcing.
"For example, the Commission proposes to measure the number of market entries and exits, but this measure does not account for trends in outsourcing and insourcing with respect to each of the provider markets," it said.
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