The Cooper Review has released its first ‘Preliminary Report’ summarising key themes emerging from their review into the superannuation industry. Titled ‘Clearer Super Choices: Matching Governance Solutions’, the paper stops short of making any final recommendations but is intended to convey the panel’s current views on the issues at hand.

The panel believes the industry needs to move away from a single ‘one size fits all’ model of superannuation fund governance and adopt a system more accountable to members. The paper proposes the adoption of a ‘Choice Architectural Model’ whereby all superannuation members are classified into categories based on whether or not they have made a ‘choice’ about their superannuation.

Details of the 4 categories proposed in the Report are outlined below:

Disconnected member: Must be placed in a fund with the following features: low cost,
conservative investment strategy, minimal information or disclosure, low cost facility to
aid member identification so as to expedite relocation, consolidation, and transfer to
other categories.

Universal member: Must be in a fund with a single diversified investment strategy
(including a life‐cycle strategy) overseen by trustee with traditional duties, insurance
offered, but few other ‘bells and whistles’. Limited role for advice because advice is
‘embedded’ in the product and no choices need to be made by the member.

Choice member: Will be in a fund with potentially unlimited menu of options for
investment, insurance etc, though still subject to sole purpose test, trustee responsible
for reasonable due diligence on investment and insurance options offered, but limited
liability for choices made by individual members, effective disclosure of paramount
importance. Members likely to rely on advice or disclosure and other information about
their options.

Self‐managed: Because SMSFs are being dealt with in Phase Three: Structure, it is too early to suggest possible changes to the SMSF sector.

Review Chair Jeremy Cooper stated "So what are the aims of this model? Most members don't really engage with super, and for them we envisage a fund where the product is much simpler and cheaper for them. 'Bells and whistles' come at a cost and if you don't want them, you shouldn't pay for them. For those members who want choice, or who want to drive their own super, they will have lots of options."

The Cooper Review final recommendations and findings will be handed to the Government by June 30 2010.

The full report can be found at www.supersystemreview.com.au