Mercer has flagged its concern the Cooper review's proposed choice architecture for Australia's superannuation system will disconnect fund members from their superannuation and lead to greater inefficiencies and higher costs.
In its third submission to the Cooper review, Mercer argues the proposed model, which will separate members into different funds, will lead to more Australians being disconnected from their superannuation.
Mercer says the model will lead to greater inefficiencies, as funds make significant and costly changes to fit the new architecture, and will increase costs for members.
Furthermore, the submission argues that barriers will also be established that will discourage members from moving out of the default option or from seeking professional advice.
Communicating with members should be a key objective of the new structure, Mercer partner David Knox said.
"This concept of a distinct universal fund where members are only offered minimal advice and one single default investment strategy indicates the Cooper review panel considers it acceptable that the majority of members remain uninterested in superannuation and leave all of their decisions in the hands of the trustee - we strongly disagree," he said.
"The idea of telling members they only need minimal advice simply to keep costs down will promote a low-level status quo. Members will not readily seek advice or change out of the default option, resulting in a reduced understanding of superannuation."
Therefore, Mercer has proposed an alternative model that would see providers able to cater to the needs of both "universal" and "choice" members, as well as some "disconnected" members in the same fund.
"We agree with the idea of classifying members, but do not think they need to be segregated into separate funds," Knox said.
