deed) to outsource to related-party providers (input) From a system perspective it is inefficient to have outsourcing requirements within the trust deed. This most efficiently dealt with through regulatory standards. Process used by funds to make outsourcing decisions (input) We recommend that this indicator be removed. This process is set down by Prudential Standard and therefore indicator is not relevant. Cost and member fee differences from outsourcing administrative and insurance services to related versus unrelated parties (output) Agree with this indicator. We have interpreted this indicator to mean that the best case outcome is that a related party outsourced provider results in reduced costs and a negative outcome would be increased costs arising from using related party outsource providers. Transparency and efficacy of fee disclosure by funds, including for distinct services (behaviour) Agree with this indicator. We note further legislative support is required for system wide disclosure and that there are current challenges with implementation of RG97. Proposed new indicator: Bundling of superannuation products with product discounts Vertical and horizontal integration creates the opportunity for employee interests to be overridden by the bundling of sub-standard superannuation products with discounted products. An ISA survey showed that 26 per cent of small to medium size businesses had been offered a default superannuation account by a bank and of that group more than half had been offered inducements to change to the bank’s fund. Proposed new indicator: Inducements offered to employers to win default superannuation The existing law should be reviewed with respect to employer inducements. In addition, the roles and powers of the regulators ASIC, APRA and ACCC should be reviewed to consider whether the members’ best interest obligations was met on all occasions. Finally, the role of employers and whether they should be considered as fiduciaries needs to
position to access it. Measurement of voluntary contributions provides more insight into members’ engagement and long term savings. This also reflects the decision making of members who make additional contributions, but cannot qualify for Indicator AIST response AIST key points Are member preferences and needs being met by the system providing products and information to help members optimally consume their retirement incomes? Introduction of new retirement income products and development of more tailored default products* (output) Concerned with ambiguity of this indicator. While we anticipate innovation in retirement income products, it is not sufficient to say that introduction of new products equates with member preferences being met. Evidence in accumulation funds suggest that product development has been supply driven rather than demand driven. Proposed new indicator: Extent of risk pooling to assist optimal consumption of retirement incomes Products that genuinely help members consume their retirement incomes optimally will often, but not always, include elements of risk pooling. The extent to which risks are pooled within the system is suggested above as an additional Economies of Scale indicator and should also be included here. Larger funds often manage risk-pooling directly in-house, while other funds can avail themselves of external arrangements. The extent to which members have the opportunity to share risks collectively is an important efficiency indicator and also an indicator of optimality of de-accumulation of retirement savings. Take up of different retirement income products (output) Concerned with ambiguity of this indicator. While we anticipate innovation in retirement income