Lower superannuation fee structures do not necessarily equate to better outcomes for superannuation fund members, according to the Australian Prudential Regulation Authority (APRA).
The regulator has also suggested that further consolidation within the superannuation sector may succeed in driving efficiencies without undermining competition.
APRA has used its submission to the Productivity Commission inquiry into Superannuation Efficiency and Competitiveness to warn against a simplistic approach based on fees.
“….the lowest fee structure will not necessarily provide better outcomes for members over the long term,” the APRA submission said.
“Enhancing overall long-term member outcomes by, for example, improved education and advice to support informed choices by members or more tax-effective investment management, may have a more material impact on long-term net outcomes for members than relatively small reductions in investment or administration fees.”
The submission also pointed to other factors, such as “optimising insurance arrangements to appropriately balance the cost of insurance with meeting member needs”.
On the question of further consolidation within the industry, the APRA submission said the sector was continuing to consolidate and it was “likely that further consolidation may promote efficiency without unduly impacting competition”.
It said this was because the superannuation sector remained far less concentrated than other APRA-regulated industries.
The APRA submission also pointed to the lack of consistency across the superannuation industry, warning that this might prove a challenge to making meaningful comparisons between superannuation funds.
“These include deficiencies in the quality and consistency of available data, as well as the complexity of structures and arrangements within the superannuation system,” it said.
“These constraints limit the ability to undertake comparable calculations and provide appropriate levels of transparency, including looking through various related party or other structural arrangements.”
