On December 16, 2010, the Australian government released Stronger Super, a report outlining proposed changes to the country’s mandatory occupational pension system. In early 2011, the government will set up a working group made up of representatives of the superannuation industry, employers, employees, and consumer groups, to review the proposed changes and subgroups to study design and implementation issues.
The report includes a proposal to introduce MySuper, a simple, low-cost fund with a single diversified investment strategy, to replace the default fund. MySuper would also provide life insurance and total and permanent disability insurance with an opt-out provision.
Another group of recommendations in the report aims at improving the administration of superannuation accounts. The recommendations include (i) establishing industry-wide standards to improve the quality of data, (ii) increasing the use of technology, (iii) adopting the worker tax-file number as the identifier for the entire system, and (iv) simplifying administrative processes and eliminating duplication.
As a result of the proposed changes, the government expects major improvements to the superannuation industry, which include:
Member fees would decrease. The reduction would be of about A$ 550 million (approximately US$ 548 million) per year initially and A$ 1.7 billion (approximately US$ 1.69 billion) in subsequent years.
The number of accounts would decrease. Currently, each worker has an average of three superannuation accounts, and unidentified or "lost" member accounts amount to some A$ 11 billion (approximately US$ 11.16 billion) in assets.
In September 2010, total assets under management for Australian superannuation funds were about A$ 1.3 trillion (approximately US$ 1.29 trillion), roughly equal to the country’s gross domestic product.
The full report is available at http://strongersuper.treasury.gov.au/content/Content.aspx?doc=publications.htm.
Sources:"Australia," International Update, January 2010, April 2010, and August 2010, US Social Security Administration; Stronger Super, Commonwealth of Australia, December 2010; Assistant Treasurer, Minister for Financial Services and Superannuation, press release, December 16, 2010; "Proposed Rule Changes Will Help Recovery of 'Lost' $11 Billion," Sidney Morning Herald, December 17, 2010.