Cooper Review Final Report released

Today the Minister for Financial Services, Superannuation and Corporate Law has released¹ the Final Report (Report) of the Cooper Review into the governance, efficiency, structure and operation of Australia’s Superannuation System, saying:

‘The Government welcomes the MySuper and Superstream initiatives which could lower fees by 40 per cent, lifting the retirement savings of a worker on average wages by $40,000.’ 

Mr Jeremy Cooper, Chair of the Cooper Review, makes the following observations in the Overview² of the Report:

‘We have developed ten recommendation packages aimed at benefiting members. MySuper sits at the heart of our recommendations. It is designed to focus funds on the core purpose for which they exist: optimising retirement incomes for members. SuperStream is a recognition that bringing the back office of super into the 21st century is critical to the overall functioning of the super system.’

Key elements of recommendations in the Report include:

• The Report is premised upon the view that the superannuation system should encourage and allow engaged members to be involved in their own superannuation but for members who do not wish to be engaged, the ‘system should still work to provide optimal outcomes’.
• MySuper is ‘a simple, well-designed product suitable for the majority of members. The MySuper concept is aimed at lowering overall costs while maintaining a competitive market-based, private sector infrastructure for super. The concept draws on and enhances an existing and well-known product (the default investment option). MySuper takes this product, simplifies it, adds scale, transparency and comparability, all aimed at achieving better member outcomes’.
• SuperStream is ‘a package of measures designed to bring the back-office of superannuation into the 21st century. Its key components are the increased use of technology, uniform data standards, use of the tax file number as a key identifier and the straight-through processing of superannuation transactions’.
• There should be greater focus on the overall efficiency and transparency of the superannuation system. APRA should be given a standards-making power ‘as a tool for driving transparency and comparability of member outcomes’.
• Significant changes to the SMSF sector are not required. However some changes relating to service providers, auditors and the regulatory framework are recommended.
• MySuper providers would need to show ‘sufficient scale to optimise outcomes for members’.
• A Code of Trustee Governance should be adopted.
• Members should be able to ‘make “like with like” comparisons between competing superannuation products’.
• Commissions should be ‘banned on all insurance products in super, including group risk and personal insurance’.
• Each superannuation fund should provide greater disclosure on its website regarding ‘detailed financial and operational information about the fund (including its portfolio holdings) and about the fund’s management’.
• There should a ‘whole of life’ focus in MySuper products.
• Data and research on the superannuation industry should be improved. APRA should have a greater role in this context.

The 10 chapters in the Recommendation Packages of the Final Report of the Cooper Review³ are as follows:
 
Chapter 1: MySuper and Choice Architecture
Chapter 2: Trustee Governance
Chapter 3: Investment Governance
Chapter 4: Outcomes Transparency
Chapter 5: Insurance in Superannuation
Chapter 6: Integrity of the System
Chapter 7: Retirement
Chapter 8: Self-Managed Super Solutions
Chapter 9: SuperStream
Chapter 10: Regulatory Settings
 
The government is now considering the final recommendations of the report and intends further consultation with industry on the key proposals.
 
The government’s response to the Cooper Review will form the third phase in the government’s reform of superannuation, following the Future of Financial Advice reform package which applies to financial advice generally and the Stronger & Fairer Superannuation reforms which include an increase in the Super Guarantee to 12%.
 
We will be providing further analysis next week.

Endnotes

1. Media Release, ‘Government Releases Cooper Review Into Superannuation’
2. Super System Review Final Report, Part One: Overview and Recommendations
3. Super System Review Final Report, Part Two: Recommendation Packages

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