engagement. Through the provision of high levels of personalised service, including access to advice, it is contended that members make more informed decisions, contributing to better retirement outcomes. It is recognised that keeping fees competitive is important in acting in the best interests of members. However, the focus on fees should be balanced against net returns and the services received by members. Lowest cost does not necessarily deliver on either of these objectives and we consider that net outcomes and provision of quality services should be of equal or greater importance. IFAA, QIEC Super and Club Super have concerns that if after stage 3, the Productivity Commission concludes that the superannuation system is somehow not sufficiently competitive or efficient, the Government may decide to impose some form of competitive process for default Fund selection. It should be noted that under the current default Fund model, in some cases, selection of a default Fund (negotiated in good faith by the industrial parties) can qualify the members for a higher level of employer contribution, or provide access to customised insurance that specifically caters for the needs of members in that particular industry. This is considered to be in the best interests of those members. A periodic competitive default fund selection process is likely to lead to Funds focussing on short term outcomes, to maximise their prospects in any selection process. This may well be contrary to the best interests of the members, as Trustees should have a long term focus in managing superannuation monies. In addition, a periodic competitive selection process implies a focus on Funds with the lowest fees, which may not provide the member with access to the above-mentioned benefits, including superior insurance or access to a broad range of asset classes when investing. Lowest cost products are also unlikely to offer superior service, which is again unlikely to be in the best interests of members. This outcome would be at odds with two of the Productivity Commission’s stated system objectives, which are that the superannuation system should meet member needs and preferences, including for insurance. These implications need to be seriously contemplated in any consideration of a competitive process for default fund selection. This is aside from the very significant implications which are likely to eventuate for the viability of Funds who do not attain default fund status under any such model. The potential closure of many Funds and merging millions of membership accounts in remaining Funds, is fraught with risk, with consequent impact on system stability. This potential outcome would seem to undermine one of the Productivity Commission’s stated system objectives, that the superannuation system should complement a stable financial system. Additionally, any associated large scale reduction in Funds in the industry as a result, would also reduce choice available to members and significantly reduce competition in the system, which is again contrary to one of the primary objectives the Government is trying to achieve. It may also result in a small number of large players, with consequent concentration risk. The fact that competitive default fund selection processes may have been adopted in some overseas jurisdictions does not mean the same solution is necessarily appropriate in the Australian superannuation system. The structural and regulatory differences in retirement income systems between countries, is inevitably very significant, and the transplanting of policy settings should be considered with extreme caution.