The Productivity Commission’s (PC) final report into the superannuation industry did not adhere to the evidence presented to it and links with its final recommendations were tenuous, leading it to make unsubstantiated claims, according to Rice Warner.
In its commentary on the report, titled “Productivity Commission parts company with the evidence”, Rice Warner claimed the work undertaken by the commission was worthwhile and the quality of its findings were high, including up to the release of its draft report in May 2018.
“However, many parts of the Technical Supplements issued in November 2018 and the underlying modelling used for the PC’s benchmarking and analysis have not consistently demonstrated the same quality,” the commentary said.
“Most disappointingly, the link between the PC’s recommendations and its earlier analysis has become increasingly tenuous as the inquiry progressed.”
Rice Warner said the commission “appears to have been affronted by the lack of enthusiasm for its proposals in the draft report” and had ignored concerns about those proposals, and instead adopted an aggressive tone in the final report, which included a number of “unsubstantiated assertions”.
The actuarial firm pointed to the commission’s view that the Australian superannuation system was broken, saying “this remarkable statement is contrary to much of the evidence available, including analysis by the PC” and was contrary to the Association of Superannuation Funds of Australia’s view that this country had a world-class private pension system.
The commentary was also critical of the PC’s view that competition was not shaping the superannuation sector and the commission’s recommended models would do more to encourage change.
“Competition has driven major change, for example, the oldest segments, corporate and retail, have market share reducing from 42 per cent of all FUM (funds under management) in 2004 to 27 per cent in 2018. Similarly, the SMSF segment is very large – all of this is caused by having a robust competitive marketplace,” it noted.
Rice Warner said while it agreed with the PC about the breadth and scope of the review, “it has been hampered by poor data and analysis leading to inconclusive results, making it difficult for the study to achieve its objectives”.