conducting this inquiry in parallel with our inquiry into competition in the broader Australian financial system, which complements the analysis undertaken here. We have consulted widely in preparing this draft report (and the two preceding stages), and will continue to do so as we work on the final report. Public submissions are welcome (by 13 July 2018). We will also be holding public hearings. Box 3 done new and novel What we’ve that’s We have undertaken several novel analyses for this inquiry. We: constructed investment benchmark portfolios to compare performance across the system (by segments, funds and products) against the relevant benchmark portfolio, adjusted for investment strategy (asset allocation) developed a range of cameos to illustrate how retirement balances can be eroded by multiple accounts, unpaid super, insurance premiums, high fees and low net returns undertook econometric analysis of products to look at impacts of product proliferation on costs and fees, combined with stochastic analysis of how these fees affect members’ retirement balances simulated sequencing risks that members might face to evaluate how effective lifecycle products are at managing these risks. Two further pieces of analysis are well advanced, and will be uploaded on our website as technical supplements following release of this draft report. We are: undertaking econometric analysis of economies of scale to estimate cost savings that have resulted from scale improvements to date, what scale benefits remain to be realised, and the degree to which the benefits of scale have been passed through to members as lower fees modelling the fiscal effects of insurance in super, including the impact of insurance payouts on social security payments and the impact of retirement balance erosion caused by insurance premiums on Age Pension liabilities. What outcomes are members getting? The super system exists to support its members in retirement. As such, the outcomes delivered to members matter above all else. In the long term, members need strong investment performance and confidence that their balance is not eroded by unnecessarily high fees or insurance premiums. They also need access to products that meet their individual requirements especially once they have retired and the right information to make — — decisions. The system does well in some of these respects, but not all. There is much room for improvement.
conducting this inquiry in parallel with our inquiry into competition in the broader Australian financial system, which complements the analysis undertaken here. We have consulted widely in preparing this draft report (and the two preceding stages), and will continue to do so as we work on the final report. Public submissions are welcome (by 13 July 2018). We will also be holding public hearings. Box 3 What we’ve done that’s new and novel We have undertaken several novel analyses for this inquiry. We: constructed investment benchmark portfolios to compare performance across the system (by segments, funds and products) against the relevant benchmark portfolio, adjusted for investment strategy (asset allocation) developed a range of cameos to illustrate how retirement balances can be eroded by multiple accounts, unpaid super, insurance premiums, high fees and low net returns undertook econometric analysis of products to look at impacts of product proliferation on costs and fees, combined with stochastic analysis of how these fees affect members’ retirement balances simulated sequencing risks that members might face to evaluate how effective lifecycle products are at managing these risks. Two further pieces of analysis are well advanced, and will be uploaded on our website as technical supplements following release of this draft report. We are: undertaking econometric analysis of economies of scale to estimate cost savings that have resulted from scale improvements to date, what scale benefits remain to be realised, and the degree to which the benefits of scale have been passed through to members as lower fees modelling the fiscal effects of insurance in super, including the impact of insurance payouts on social security payments and the impact of retirement balance erosion caused by insurance premiums on Age Pension liabilities. What outcomes are members getting? The super system exists to support its members in retirement. As such, the outcomes delivered to members matter above all else. In the long term, members need strong investment performance and confidence that their balance is not eroded by unnecessarily high fees or insurance premiums. They also need access to products that meet their individual requirements — especially once they have retired — and the right information to make decisions. The system does well in some of these respects, but not all. There is much room for improvement.
superannuation-assessment-draft-overview.docx