E2. Are costs Relationship between level of Research firms; AIST does not support this indicator as it is ambiguous and incurred by funds administration fees and member surveys requires the Commission making judgements as to what is a and fees charged quality of member services “quality service”. Data reliability is questionable, but we note to members (output) that research houses include quality factors in determining being minimised, "fund of the year" etc. Equally relevant to SMSF sector but data taking account of from accountants etc. will be hard to come by. service features AIST notes research indicating that there was little evidence that provided to higher fees correlate with better member service and concerns members? from the Cooper's review that many funds were providing higher levels of service, often unused by the great majority of members, at higher cost. E2. Are costs Unused scale economies at Regulator data; Estimations of unrealised scale benefits are important in incurred by funds fund level* (output) research firms assessing overall industry structure. and fees charged See comments in the main submission. There is a significant to members international discussion on ‘unused scale economies’. being minimised, Economies of scale may exhibit a U shaped average cost taking account of function. The range of factors that can impact on scale are service features diverse and there is uncertainty to the optimal size of a pension provided to fund in the international context. members? Research indicates that many drivers of scale economy and optimal scale may change over time. There is a need for substantive work on the Australian system on optimal scale. AIST believes that this could be an area of future focus for the Commission, but at the current time when research on this issue is still developing this is not a workable indicator.
E2. Are costs incurred by funds and fees charged to members being minimised, taking account of service features provided to members? Relationship between level of administration fees and quality of member services (output) Research firms; member surveys AIST does not support this indicator as it is ambiguous and requires the Commission making judgements as to what is a “quality service”. Data reliability is questionable, but we note that research houses include quality factors in determining "fund of the year" etc. Equally relevant to SMSF sector but data from accountants etc. will be hard to come by. AIST notes research indicating that there was little evidence that higher fees correlate with better member service and concerns from the Cooper's review that many funds were providing higher levels of service, often unused by the great majority of members, at higher cost. E2. Are costs incurred by funds and fees charged to members being minimised, taking account of service features provided to members? Unused scale economies at fund level* (output) Regulator data; research firms Estimations of unrealised scale benefits are important in assessing overall industry structure. See comments in the main submission. There is a significant international discussion on ‘unused scale economies’. Economies of scale may exhibit a U shaped average cost function. The range of factors that can impact on scale are diverse and there is uncertainty to the optimal size of a pension fund in the international context. Research indicates that many drivers of scale economy and optimal scale may change over time. There is a need for substantive work on the Australian system on optimal scale. AIST believes that this could be an area of future focus for the Commission, but at the current time when research on this issue is still developing this is not a workable indicator.
sub039-superannuation-assessment.docx