The coalition and the FPA have raised concerns over the quality of cover and service provided to Australian income earners attracted to low-cost superannuation products under the government's MySuper reforms.
Opposition assistant treasury spokesman Matthias Cormann said the coalition was concerned the low-cost funds mandatorily available to Australian workers under MySuper would not deliver real value.
"The superannuation value proposition is much more complex than the government's simplistic 'cheapest is best' approach," Cormann told Investor Weekly.
"Recent research from Chant West found that a very small reduction in fund performance on the back of lower performance of MySuper funds will very quickly more than wipe out any gain from lower fees.
"The best way to maximise value for super fund members is by making sure there are proper competitive tensions in a transparent system across all parts of the value proposition.
"Instead of designing financial products through legislation, the government should focus on improving the transparency of the information available to consumers and work towards standard definitions across a range of relevant indicators related to the superannuation value proposition."
FPA policy and government relations general manager Dante De Gori said while there were some definite positives in the MySuper reforms, he was concerned the promotion of low-cost funds as a vehicle to save for the future without adequate research by workers or employers could lead to investors being "under covered".
"Our main concern is the false sense of security that MySuper low-cost funds may generate. Many Australians attracted to the low-cost MySuper products may believe they have an adequate amount to retire on or enough personal insurance," De Gori told Investor Weekly.
"The fear is that many will find out too late that while it seemed attractive to take the low-cost option, they are left with not enough when they retire.
"Finding the right low-cost MySuper product for employees that balances low fees with adequate performance will also take time for employers. There is a concern that many employers may not have the capacity or time to do the research to select the most appropriate fund."
A spokesman for Financial Services and Superannuation Minister Bill Shorten rejected any suggestion that Australians' retirement savings could be at risk from underperforming low-cost funds, saying the government did not accept lower fees meant poor service quality.
"Roy Morgan data shows that the big six retail funds have the lowest customer satisfaction of any superannuation segment, including industry," the spokesman said.
"MySuper will enable a fairer comparison of funds on the basis of fees, insurance coverage and investment performance."
Cormann said Labor's focus on low-cost funds as a preferred model came from its close ties to the union-dominated industry funds.
"The current system for selecting default superannuation funds under modern awards is a national disgrace and should be addressed by the government as a matter of priority," he said.
"Labor promised before the last election to get the Productivity Commission to design a process for the selection and ongoing review of default superannuation funds to ensure the process is more open, transparent and competitive.
"This is a very good idea that has ongoing and strong bipartisan support. Yet in more than 12 months in the job, Minister Shorten has failed to act on this pre-election promise."
