AFR article: Super reforms create competition conundrum
Super reforms create competition conundrum
By forcing Australia’s big superannuation funds to compete harder for members, could the Coalition’s Your Future, Your Super reforms ultimately make the sector less competitive? That’s the question posed by Melbourne group Right Lane Consulting …
The Australian Government’s Your Future, Your Super reforms were introduced to improve the efficiency and accountability of the superannuation system. While the intent is to address structural issues such as underperformance, multiple accounts, and fund inefficiency, the reforms may inadvertently create a competition conundrum—one that could lead to a less diverse and less competitive superannuation landscape.
A key concern raised by Right Lane Consulting is that the reforms disproportionately impact small and medium-sized funds, particularly specialist funds that serve niche member groups. These funds often provide tailored services based on deep understanding of specific demographics or occupations. However, the dismantling of the default distribution system—where members are automatically enrolled in a fund through their employer—threatens their ability to grow. Under the new rules, members are “stapled” to their first fund, significantly reducing the pool of new entrants available to smaller funds.
This shift forces funds to compete in the direct-to-consumer market, where only a few large players have the resources and brand recognition to succeed. The result is a system that favors mega funds capable of investing heavily in marketing, compliance, and member acquisition. Smaller funds, lacking these capabilities, may struggle to remain viable, leading to consolidation and a reduction in fund diversity.
Right Lane’s analysis suggests that the ideal superannuation system would include 3–5 generalist mega funds complemented by 7–10 specialist funds. This balance would ensure both efficiency and member choice. However, the current trajectory risks creating a system dominated by just a few large funds, potentially stifling innovation and reducing the ability of members to find a fund that aligns with their specific needs.
Moreover, the increased compliance burden and shrinking revenue base for smaller funds could accelerate their exit from the market. This not only affects competition but also undermines the principle of member-centric service delivery that many specialist funds uphold.
In summary, while the Your Future, Your Super reforms aim to enhance the super system’s performance, they may inadvertently reduce competition and diversity. Policymakers must consider adjustments that preserve the role of specialist funds and ensure a balanced, competitive superannuation landscape that serves all Australians effectively.
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