AUSTRALIA - Australia's savings could grow by another billion dollars a year with the use of better back-office administration, former corporate regulator Jeremy Cooper has said.
Cooper, whose review into Australia's pension system was released earlier this month (GP Online, July 5) , said it cost the superannuation industry about A$3bn to A$3.5bn a year to administer the current system.
His review made two main recommendations to simplify Australia's superannuation system, which is currently overflowing with more than 33 million accounts.
He suggested a no-frills option called MySuper should form the default fund option for about 80% of workers unwilling or unable to make a choice, while SuperStream would aim to clean up the "back-room" of superannuation funds using an improved system of electronic records to cut physical paperwork, speed transfers and lower costs.
Cooper told the Australian Broadcasting Corporation's Inside Business programme that SuperStream would cover one-quarter to one-third of that administration. "So you get somewhere around about a billion dollars if that can be taken totally electronic - no human intervention. You'd save around a billion dollars a year," he said.
Asked whether the savings would be captured by fund managers, Cooper accepted some would end up with intermediaries and administrators who "have been forced to do their work for an unacceptably low profit margin. Some of it will leak, but the large proportion of it will go to members", he added.
Cooper said one issue for the industry to resolve was the creation of financial products to meet the needs of retirees, such as one to cope with inflation and longevity risk. "It's an area that needs a lot more work," he said.
Most respondents in this week's Pensions Buzz do not think businesses should be able suspend AE contributions if in financial distress.
Former BHS owner Dominic Chappell has lost the appeal against his section 72 conviction and sentence for failing to hand over information to The Pensions Regulator (TPR).
This week's top stories include Marsh and McLennan Companies agreeing to buy JLT, and the home secretary calling for AE to be scrapped in a no-deal Brexit scenario.
Lesley Titcomb says the watchdog wants closer interactions with pension funds to spot problems sooner and act before having to use its more stringent powers