Productivity Commission on superannuation: what you need to know
If you have super with a large fund, it’s a good idea to think about whether the trustees of that fund always act in your best interests. Recent findings of the Productivity Commission into superannuation suggest that large super fund trustees often don’t fulfil their legal obligations to promote the best interests of members.
The Productivity Commission is a permanent government research body that advises on issues affecting Australians. Its recommendations often end up becoming the law. The Productivity Commission researched and produced a report called ‘Superannuation: Assessing Efficiency and Competitiveness’ in late 2018. While the report occurred in the shadow of media coverage of the banking Royal Commission, the Productivity Commission’s report on super is actually more thorough.
For insurance held in a large super fund, questionable practices of large funds included:
- extremely complex and incomparable policies
- difficulties that members had interacting with large super funds, especially when trying to cancel insurance or make a complaint
- bundling of life and disability insurance, when some members only want disability cover
The law also says trustees must act in members best interests, but the superannuation report found that many don’t comply or only follow rules in a ‘tick and flick’ sense without striving to protect and promote members’ best interests. In fact, the report stated that trustees sometimes did not understand what the law required of them. The independent report stated that the government should re-articulate the law with new legislation, or by bringing the super funds to court in test cases that demonstrate what is required.
It’s important to keep this in mind next time you review your super member statements. While an SMSF is not right for everyone, one powerful aspect of a self managed super fund is that they avoid this problem of leaving a large corporate trustee in control of your money within a complex structure.
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