NAME: LIN XIAOYI
DATE: 21/03/2012
C3120705
Week 4: There has been a significant growth in the amount of money invested in Australian superannuation funds over the past twenty years.
a) Critically analyse the source of this growth
b) Discuss the regulatory environment within which superannuation funds operate.

Answer: a)
The growth is primarily caused by the introduction of Superannuation Guarantee Charge, introduced from 1 July 1991, which initially required employers to contribute at least 4% (or 3%for smaller employers) of most employees’ wages or salary to a superannuation plan. In 2002, the government has also legislated that this minimum contribution rate increased to 9% for all employee. In addition, these required contributions vest with the employee and cannot be accessed until age 55.In other words, the objective is that the funds remain within the superannuation system until the person’s retirement.
In view of the increasing importance of superannuation funds within both the economy and the capital markets, it is necessary that the investment policies of these funds and their implication are better understood by the government, policy makers, commentators, market players and companies seeking capital.

b)
Financial Services Working Group
One of the ways the Government is doing this is through the Financial Services Working Group.
The Working Group was established to facilitate the creation of short, simple and readable disclosure documents, better enabling consumers to understand and compare the full range of financial products.
The first of these simplified product disclosure statements
Governance
Now a few comments on the broader governance arrangements within the superannuation system.
As I indicated in a speech to the SPAA Conference in March there are a range of matters currently under consideration in respect of the self managed superannuation fund sector. Further I indicated governance matters required consideration across all sectors of the industry – corporate, public sector, industry and retail.
Default funds and awards
An efficient and effective superannuation system must include safe, high-quality default mechanisms for people who fail to make an active, informed choice.
Members of consistently underperforming funds will suffer serious detriment to their post-retirement income prospects if they remain in an underperforming fund. Lower fund returns produce lower real retirement lump sums.