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Rash consumer behaviour demands super safety net: ISA
Industry Super Australia (ISA) is urging bank-owned super funds to realise that three independent reviews ordered by two governments have concurred that the default fund super safety net is a must.
In a report released today titled "From Wallis to Murray: the New Consensus", the ISA referred to the Financial System Inquiry (FSI) to argue that behavioural economics identifies that most individuals do not always act rationally and need consumer protection.
The ISA used the report to once again rebuff moves by the banks to stop the Fair Work Commission from selecting default super funds, and argued they want to bundle up business banking with their super products and sell it to employers.
"This could result in employees being moved into a poorer performing bank-owned fund, leaving them with less money in their account upon retirement," ISA CEO David Whiteley said.
The report said analysis of the default super arrangements by the FSI concluded that complexity, excess choice, insufficient financial literacy, procrastination, poor planning and high search costs are resulting in irrational consumer behaviour towards super.
"This is the lived reality of our super system, in which eight out of 10 people don't actively select their own fund," Whiteley said.
The report used the FSI, Wallis Inquiry and the Productivity Commission report to reiterate that the selection process run by the Fair Work Commission is effective.
"The Productivity Commission and Murray Inquiries have both rejected calls for deregulation of default fund selection and concluded that members of workplace default funds need strong protections that competitive market forces could not reasonably be expected to provide," it said.
"The empirical evidence clearly shows that if all Australians had a super fund equalling the performance of the average super fund selected by the Fair Work Commission process, they would collectively have billions of dollars more in retirement savings."
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