The financial industry is on notice from the Productivity Commission that it will investigate transition to retirement and pension products in its inquiry into the competitiveness and efficiency of the super system.
“The Commission intends to assess whether the system is meeting the needs of members during these phases, including via product innovation that addresses tax effectiveness, transition and longevity risks,” says the Commission in its draft report released this month.
The inquiry will also look at life insurance within super and whether members are getting the right cover at the “least cost”. While insurance in super has given many people life insurance cover, the premiums do reduce their super balances.
The major super funds regulated by the Australian Prudential Regulation Authority last year collected $8 billion in premiums for life, total and permanent disability and income protection insurance.
Australia’s modern superannuation system began in 1986 with the compulsory move to pay 3% of an individual’s wages into super. The percentage is now 9.5% and moves to increase it to 12% have been pushed out.
The first people to retire from a full working life of compulsory super won’t be leaving work until 2030 and until then many retirees, particularly women, will need to rely on the age pension, or a mix of government pension and private super.
* The Commission expects to hand its final report to the Federal Government in November. Submissions to the draft report are open until September 9.