deed) to outsource From a system perspective it is inefficient to have to related-party outsourcing requirements within the trust deed. This most providers (input) efficiently dealt with through regulatory standards. Process used by We recommend that this indicator be removed. funds to make This process is set down by Prudential Standard and outsourcing therefore indicator is not relevant. decisions (input) Cost and member Agree with this indicator. fee differences from We have interpreted this indicator to mean that the best outsourcing case outcome is that a related party outsourced provider administrative and results in reduced costs and a negative outcome would be insurance services to increased costs arising from using related party outsource related versus providers. unrelated parties (output) Transparency and Agree with this indicator. We note further legislative efficacy of fee support is required for system wide disclosure and that disclosure by funds, there are current challenges with implementation of RG97. including for distinct services (behaviour) Proposed new Vertical and horizontal integration creates the opportunity indicator: Bundling for employee interests to be overridden by the bundling of of superannuation sub-standard superannuation products with discounted products with products. An ISA survey showed that 26 per cent of small to medium size businesses had been offered a product discounts default superannuation account by a bank and of that group more than half had been offered inducements to change to the bank’s fund. Proposed new The existing law should be reviewed with respect to indicator: employer inducements. In addition, the roles and powers of Inducements offered the regulators ASIC, APRA and ACCC should be reviewed to to employers to win consider whether the members’ best interest obligations default was met on all occasions. Finally, the role of employers and superannuation whether they should be considered as fiduciaries needs to
deed) to outsource to related-party providers (input) From a system perspective it is inefficient to have outsourcing requirements within the trust deed. This most efficiently dealt with through regulatory standards. Process used by funds to make outsourcing decisions (input) We recommend that this indicator be removed. This process is set down by Prudential Standard and therefore indicator is not relevant. Cost and member fee differences from outsourcing administrative and insurance services to related versus unrelated parties (output) Agree with this indicator. We have interpreted this indicator to mean that the best case outcome is that a related party outsourced provider results in reduced costs and a negative outcome would be increased costs arising from using related party outsource providers. Transparency and efficacy of fee disclosure by funds, including for distinct services (behaviour) Agree with this indicator. We note further legislative support is required for system wide disclosure and that there are current challenges with implementation of RG97. Proposed new indicator: Bundling of superannuation products with product discounts Vertical and horizontal integration creates the opportunity for employee interests to be overridden by the bundling of sub-standard superannuation products with discounted products. An ISA survey showed that 26 per cent of small to medium size businesses had been offered a default superannuation account by a bank and of that group more than half had been offered inducements to change to the bank’s fund. Proposed new indicator: Inducements offered to employers to win default superannuation The existing law should be reviewed with respect to employer inducements. In addition, the roles and powers of the regulators ASIC, APRA and ACCC should be reviewed to consider whether the members’ best interest obligations was met on all occasions. Finally, the role of employers and whether they should be considered as fiduciaries needs to
subdr102-superannuation-competitiveness-efficiency.docx