Productivity Commission releases issues paper | Mercer

Productivity Commission releases issues paper

The Productivity Commission (‘PC’) has released an Issues Paper entitled ‘Superannuation: Alternative Default Models’ as part of its inquiry to develop alternative models for allocating default fund members to superannuation products. This paper forms part of the second stage of the three-stage superannuation review that the PC is currently undertaking.

The review’s first stage is the development of criteria to assess the competitiveness and efficiency of the superannuation system. Mercer recently lodged a submission to a draft report released as part of this stage. The PC’s final report on its recommended criteria is due in November this year.

The current second stage regarding default fund allocation is to be completed by August 2017. The third and final stage is a review of the efficiency and competitiveness of the superannuation system. Using the criteria developed in the first stage, this review will be undertaken by the PC from July 2017 following full implementation of the MySuper reforms.

The PC will be guided in its process of developing alternative models by the detailed terms of reference that the Treasurer set for it, including consideration of the strengths and weaknesses of particular overseas competitive processes. In its Issues Paper, the PC explains how it proposes to ‘operationalise’ these terms of reference, using three ‘main steps’ to design new models. These are:

1. identifying which employees the model would cover

2. specifying a competitive process to determine which products are eligible to be used as defaults; and

3. specifying how employees would be allocated to eligible default products.

The PC proposes that alternative allocative models be assessed against a baseline of no defaults. It also fleshes out potential benefits, costs and institutional considerations that would need to be taken into account in examining each model and invites responses to multiple questions.

The timetable for the final PC alternative default models report, which will follow the Issues Paper, is:

Release of draft report: March 2017

Public hearings: May 2017

Final report to Government: August 2017

Comments on the Issues Paper are due 28 October 2016. Mercer will lodge a submission.

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