Super $533k boost to nest egg
FIRST-TIME workers could retire with an extra $533,000 by 2064 under a proposed superannuation shake-up to boost returns and get rid of excess fees.
Even a 55-year-old worker could pocket an extra $79,000 on average by the time they reach 67 if superannuation is reformed to close poorly performing funds and cut costs.
The predictions are contained in a damning Productivity Commission report that warned Australians' retirement savings were being whittled away by a combined $3.8 billion a year by "structural flaws" in the super system.
The commission argues the system of default super funds - in which employees are automatically placed in a fund if they fail to select their own - is too confusing and leads to rip-offs.
Multiple superannuation funds held by people who have changed jobs make up almost a third of super accounts and cost $2.6 billion a year alone.
In a long-awaited final report into the superannuation system to be released today, the commission calls for employees to be given a list of the 10 top performing funds when they start work, as well as simpler information, so they can compare the funds.
Workers who do not choose a fund within 60 days should be placed into one of the top 10 funds, instead of the current employer's choice.
Under the plan, employees would only ever be placed in one default fund, to try to reduce the number of dormant accounts that super funds are using to skim fees and charges.
Untouched super funds with balances under $6000 should be rolled over after 13 months to the Australian Taxation Office, to cut down on fees and charges, the commission recommended.
To save costs, the report proposed people under 25 should not be automatically charged insurance premiums through super unless they opt-in.
Smaller funds tend to have poor returns and high costs and could be driven out of business under the plan.
There are 93 super funds in Australia which have less than $1 billion invested but share 1.7 million accounts between them - most of which are considered to be underperforming.
The report also called for a crackdown on fee rip-offs and tougher regulation of the super industry, which has come under scrutiny at the banking royal commission.
Treasurer Josh Frydenberg said the report showed the system of default funds had created an "unlucky lottery" for people's retirement savings.
"While this vitally important report finds that Australia's superannuation system 'has served Australians reasonably well', there are structural flaws that need to be addressed," he said.
The government will formally respond to the report after the final report of the royal commission.