Merit-based selection preferable to current superannuation safety net

The government should set up a merit-based tendering process for default superannuation accounts to save customers billions, says a report from the Grattan Institute. The findings reinforce conclusions from the Cooper Review, Productivity Commission and the Financial System Inquiry.

Reducing superannuation fees could save more than $2 billion per year but recent policy initiatives “will not cut fees much”, argues a report by think tank the Grattan Institute.

Grattan says Australians pay $4 billion per year above what would be charged by lean funds, and that cutting fees to what high-performing, lean funds charge “could save more than $2 billion a year.”

Currently the total cost of running superannuation is about $21 billion in total — 1.2% of funds under management per year, or $16 billion across the collective funds, plus about $5 billion in self-managed super.

There is “little evidence” that funds charging higher fees provide better member services, argues the report.

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