EDITORIAL

Consumers will lose if stapling is not introduced

One-in-four people have more than one super account. These people pay at least two lots of administration fees and potentially have distorted insurance arrangements. Multiple account arrangements generally occur when employees switch employers. A policy is required only because industry has failed to develop a solution.

The Your Future, Your Super (YFYS) reforms contain a stapling model where consumers are stapled to the super fund linked to their first job. The alternative model is where the single account switches to their new employer’s default fund when they change jobs.

Both models have strengths and weaknesses relating to many areas including competition, transaction costs, insurance arrangements, and engagement models. There is not a clear-cut winner – it depends on how you weight the issues. Both models are good enough.

But now there is a very real chance that stapling will not go through. This would be bad for consumers and reflect poorly on all stakeholders. How did we get to this point?

The starting point is that YFYS is a broad collection of reforms, some highly controversial (exhibit A: investment veto) and some that we consider deeply flawed (exhibit B: the performance test). The reforms interact creating further complexity. The whole reform package needs to be approved for stapling to go through.

On top of that we all seem to be experts at knocking down ideas without always proposing better solutions.

The risk now is that a stapling model will not be implemented, and consumers will lose out. A system where one-in-four people have multiple accounts cannot consider itself world class. A system where key stakeholders can’t work together to develop solutions will never achieve its full potential.

Hopefully, the right conversations are taking place. Both Minister Hume and Stephen Jones come across as well-intending and sensible. Surely the more ideological measures (such as investment veto) need to be put aside. The YFYS stapling model is good enough. Consumers shouldn’t have to wear the cost of this industry’s failure to reach sensible outcomes.

Colin Tate, chair, Conexus Institute