## Observations

The initial observation to be made is that the Productivity Commission study is extremely comprehensive in its scope. The report proposes in section 7.3 a comprehensive list of 27 criteria to assess the achievement of the 5 objectives. The report goes on to list an even more comprehensive list of 115 indicators which will be used to measure the criteria. The risk of the criteria and indicators having such breadth and depth is that when these are applied (in stage 3), the results are likely to be so complex that it will be difficult to draw clear conclusions. We consider some simplification may be appropriate. The Productivity Commission’s 3 stage study / inquiry is the latest in a long list of Government initiated inquiries / major reforms to the superannuation system in Australia. Just in the last decade, this has included:

- • Super reforms; • Super reforms;
- • tax review • tax review
- • review • review
- o resulted in Stronger Super reforms (MySuper, Superstream, Prudential Standards) o resulted in Stronger Super reforms (MySuper, Superstream, Prudential Standards)
- • System Inquiry • System Inquiry
- • reforms (RG 97 investment cost transparency, SIS s.29QC comparability, dashboard) • reforms (RG 97 investment cost transparency, SIS s.29QC comparability, dashboard)
- • increased APRA reporting • increased APRA reporting

While a number of these initiatives have added value to the industry, they evidence a relentless change agenda. For some of the initiatives, whether the overall net benefit has exceeded the cost, is doubtful. It should also be noted that each new set of obligations applies in addition to existing requirements, evidencing the ever increasing complexity of the regulatory system, with associated cost impacts. It is considered there are two major impediments to achieving optimal efficiency and competitiveness in the industry. Firstly, is the overwhelming complexity and interaction of the various elements of the system. This complexity has been acknowledged in Appendix H of the Productivity Commission’s draft report, and is considered to be a major factor in inhibiting member comprehension of superannuation. The Financial System Inquiry concluded that a majority of individuals are not actively engaged with the superannuation system. We consider that a significant contributor to this is the system’s complexity. A number of the recent or pending regulatory reforms (MySuper, APRA publishing of MySuper data, dashboards, RG 97, SIS s.29QC) appear to be predicated on an assumption that superannuation members are sophisticated investors who will analyse all of this information, compare to the market, and make rational decisions as to where to allocate their superannuation monies. It is contended that the majority of superannuation members are not sophisticated investors, who will not utilise these initiatives to undertake detailed assessments and comparisons. Therefore, these initiatives are for the benefit of a minority, but compliance with the requirements by superannuation funds has / will incur significant additional cost for all members. The second major impediment is the very extensive and constantly evolving legislative and regulatory landscape, as a result of the ongoing reviews, changing political priorities and consequent Government decisions. Configuring systems, procedures, staff training, disclosures to comply with the ever changing regulatory landscape is a major component of cost within the industry, with these costs ultimately being borne by members. Another impediment to member confidence is the announcement of proposed