Complexity, choice overload, low levels of financial literacy, lack of planning, procrastination and high search costs, among other behavioural factors, are influencing Australians' approach to their superannuation savings, says Industry Super Australia.
Originally published on the ISA website 5 February - click here to read it there
"This is the lived reality of our super system, in which eight in ten people don't actively select their own fund," said David Whiteley, Chief Executive of Industry Super Australia.
"This consumer behaviour has now led to a consensus by three major financial inquiries (Cooper Review, Productivity Commission and Financial System Inquiry) that Australia's superannuation system needs to retain a decent standard of consumer protection.
"These independent inquiries agree the existing safety net of better performing funds should remain in place and be subject to a "quality filter". This default system has been overseen successfully for many years by the Fair Work Commission and implemented throughout awards and workplace agreements for people who don't actively choose a fund.
"Despite these inquiry findings, bank-owned super funds are continuing a campaign to scrap the safety net.
"The banks, which already dominate 80 per cent of the household banking market, are now seeking a greater share of the superannuation market.
"However, because of their inability for more than a decade to match the returns of the industry super fund sector (on average), bank-owned super funds want to avoid any obligation to compete on investment performance.
"Instead, they want to bundle up business banking with their super products and sell this to employers. This could result in employees being moved into a poorer performing bank-owned fund, leaving them with less money in their account upon retirement.
"In 2014, the banks lobbied to remove consumer protection for people needing financial advice. In 2015, they are lobbying the government to scrap the super safety net for Australians who do not choose their own super.
"Industry Super Australia calls on the banks to recognise the consensus that has now emerged from Australia's three major financial inquiries and accept that a safety net must remain central to the system to protect superannuation consumers," concluded Mr Whiteley.
Download the full report: "Behavioural Economics: From Wallis to Murray: the New Consensus"
Media contact: Phil Davey 0414 867 188
Originally published on the ISA website 5 February - click here to read it there