Eva Scheerlinck, chief executive officer at the Australian Institute of Superannuation Trustees (AIST), provides a perspective on the issues currently impacting the country’s superannuation industry.
The Australian superannuation landscape is in a period of reflection and transition following the Royal Commission into Financial Services that uncovered serious systemic misconduct in banking, insurance, financial advice and bank-owned pension funds around the country.
The resulting loss of consumer trust and confidence has forced both the government and regulators to develop new laws and regulations to ensure consumer interests are better protected. With a governance model that puts members first, the $1.4 trillion not-for-profit pension sector emerged relatively unscathed from the Royal Commission.
As the Commission hearings revealed case after case of bank-owned funds prioritising the pursuit of shareholder profits ahead of their customers’ best interests, consumers took flight and billions of dollars poured into the not-for-profit funds.
In the wake of the Royal Commission, Australia’s twin financial regulators had adopted new strategies around enforcement and prudential supervision. As part of a new “why not litigate” approach, the Australian Investments and Securities Commission has significantly increased and accelerated court-based enforcement matters.
Harsher civil penalties and criminal sanctions have also been introduced. Beyond the Royal Commission, the superannuation sector is currently dealing with an ongoing debate about the adequacy of Australia’s compulsory superannuation system.
Currently, all employers are required to contribute 9.5% of employee wages into a pension fund. While this rate has been legislated to gradually increase to 12% by 2025, a small, but vocal, minority of mostly conservative politicians, oppose this.
AIST has stepped up its advocacy on this issue. Australia’s superannuation system is increasingly delivering better outcomes for retirees from all walks of life. But more needs to be done to ensure that the system is fair to all and that everyone – regardless of their gender or income level – can maintain their living standards in retirement.
With Australia’s age pension one of the lowest in the OECD, our population living longer, and the broken work patterns of women, freezing the compulsory rate at 9.5% will mean many Australians will retire in poverty. Australia’s super system is globally acknowledged as one of the best in the world. We aim to ensure it gets better.
This column features in the Transition Management Guide 2019. Download the full guide here.
Learn more about how a raft of regulatory changes are giving rise to increased M&A activity and influencing funds' transition requirements in Global Investor's analysis of transition management trends in Australia.