Recommendation 10.12 of the Super System Review Report is:
New Retirement Savings Accounts should not be allowed to be established after MySuper becomes effective and a mechanism should be considered for facilitating existing RSAs to be transferred to MySuper or other superannuation products.
The discussion is in Chapter 10 of Part 2 here:
“7.3.1 Retirement Savings Accounts
At 30 June 2008, there were approximately 120,000 Retirement Savings Accounts (RSAs) with $1.2B in assets, making up 0.32 per cent of assets in the retail sector.25 The asset base jumped dramatically to $6.2B by June 2009 due to the attraction of their capital guaranteed nature during the global financial crisis. Currently, there are ten institutions offering RSAs, most of which are credit unions.
RSAs have generally not been a success because they are a capital guaranteed product and there is currently no scope in the RSA framework for adding a market‐linked investment where the risk of loss is borne by the holder. RSAs are thus suitable only for individuals with an extremely low risk tolerance, and are essentially unsuitable for much of the accumulation phase of retirement saving.
The interest rate spreads used as a measure of the implicit fee in an RSA as the explicit account keeping fee is usually very low (typically between $0 and $30 a year). Implicit fees for balances less
than $5,000 are, on average, 1.2 per cent and generally fall as the account balance increases.
Rice Warner estimates RSA expense charges for the year to 30 June 2008 to be 2.3 per cent of assets.
Of this, 0.60 per cent is attributable to administration and 1.7 per cent to investment management.
Rice Warner explains the relatively high costs as a reflection of the low average account balances of RSAs.
The Panel considers that there has been little market demand for this product and they seem not to meet the low‐cost objective for which they were originally intended. As such, the Panel believes the
RSA product should be phased out and no new RSA should be established once MySuper products are available.”
