Billions of dollars will be pumped into Australians' superannuation accounts as part of sweeping changes including a new low-cost, no-frills super offering.
Billions of dollars will be pumped into Australians' superannuation accounts as part of sweeping changes including a new low-cost, no-frills super offering.
The federal government has accepted most of the recommendations of the Cooper review of the industry, including setting up the MySuper product.
It will replace existing default funds in which about 80 per cent of Australians have their superannuation money.
But most of the reforms are still around four years away, with an extensive stakeholder sonultation period to come.
Assistant Treasurer Bill Shorten says that by combining super accounts and reducing costs members will save $2.7 billion a year in fees.
The superannuation industry processes an estimated 100 million transactions a year at a total cost of $3.5 billion or $35 for each transaction.
Adding to the inefficiency each working Australian has, on average, three superannuation accounts.
Mr Shorten had no concerns about employers being able to afford the increase in their compulsory super contributions from nine per cent to 12 per cent by 2013, as promised by the government.
"A lot of Australians are concerned about the adequacy of their retirement income, and without the nine per cent people wouldn't have the sort of savings accounts we do now," he told reporters in Melbourne.
"So by going to 12 per cent is just prudential.
"A good idea can't be stopped just because some people at the time don't get what we need to do for the future."
Australia has the fourth largest amount of superannuation funds under management in the world totalling $1.3 trillion, yet none of the nation's superannuation funds is in the world's top 25.
Mr Shorten said the government was not compelling funds to merge, but he hoped that under the new rules trustees would see the benefits of economies of scale that come with consolidation.
"We hope our reforms will encourage super funds to contemplate mergers and consolidation - it's good business sense, but these decisions are made by the trustees of the funds concerned," he said.
Industry players welcomed the reforms.
Construction superannuation group Cbus, which has 650,000 members, said the reforms would result in greater efficiency and streamlining of administrative systems.
Cbus chairman chief executive David Atkins says it brings the industry out of the 19th century and into the 21st century.
"Every week more than 21,000 pieces of paper are manually processed by Cbus accounts staff," he said.
"Today's announcement will see administration processes streamlined and the cost saving passed on to our members."
Industry Super Network chief David Whiteley said the government had effectively endorsed the not-for-profit fund model of low fees, high returns and no commission.
"MySuper prohibits some of the most inappropriate practices in our compulsory system such as payment of commissions to financial planners where no advice is provided, flipping and the payment of commissions by members for financial advice given to employers," Mr Whiteley said.
ACTU president Ged Kearney said the reforms would add tens of thousands of dollars to the savings accounts of Australians when they retire.
"For too long, the retirement savings of working Australians have been eroded by fees, commission and charges imposed by the for-profit retail funds," Ms Kearney said.
"The reforms announced by the government is a step towards ensuring the money workers contribute to superannuation is there for them in retirement, and not swallowed up by unnecessary fees and profits."
The government estimates that a 30-year-old earning $65,000 a year will end up with $40,000 more in their account on retirement at 67 as a result of the reforms.
