The system is too focused on supporting saving through the accumulation phase, and not focused enough on how it will manage payouts.

The system is too focused on supporting saving through the accumulation phase, and not focused enough on how it will manage payouts.

Australia's superannuation system is one of the world's least efficient and most expensive and financial disclosure laws aren't working, the Treasury says in its submission to the Murray financial system inquiry.

Of the 15 OECD nations whose pension operating expenses it graphs, Australia's are exceeded only by those of Spain, Hungary, Mexico and the Czech Republic.

In an apparent reference to overcharging, it says principal-agent theory suggests that the separation of the ownership of funds from those who manage them ''opens up the risk that managers rationally maximise their own interests at the expense of fund members''.

Other reasons why Australia's superannuation sector has high costs are its reliance on manual and paper-based back-office systems and the maintenance of legacy computer systems.

The super system is too focused on supporting saving through the accumulation phase, and not focused enough on how it will manage payouts to growing number of Australians who will be drawing down on their accounts. ''Neither it nor the insurance sector has sufficiently developed a broad range of products for individuals to manage their financial affairs through retirement,'' the Treasury says.

Also, account-based pensions as presently structured do not protect against longevity risks.

''Australia is the only country which relies predominantly on a mandatory privately administered defined-contribution structure for retirement income not to have incentives or mandates in place for longevity insurance.''

Treasury said Australia's financial disclosure laws have reached their limit, being both expensive to administer and of limited use to customers.

Regulations should acknowledge ''that around half the Australian adult population struggles to understand basic everyday documents and forms, and are unable to understand and perform rudimentary analysis of figures in texts, tables and graphs'', it says.

''Current disclosure requirements are not effective in helping consumers make informed decisions and financial literacy programs have little, if any, sustained impact on behaviour or improved financial outcomes. As such, businesses are incurring compliance costs from a regulatory regime that has minimal impact on consumer empowerment, and often pass these costs on to consumers.''

Treasury suggests ''unlocking the potential of markets by making information more accessible electronically to enable growth of 'information intermediaries', such as online product comparison specialists that could apply expertise in presenting information in an effective, readily digestible way''.

It has little problem with Australia's self-managed superannuation sector, believing it is one of the few parts of the industry in which participants are aware of the risks they are taking.

Although against the recommendations of the Wallis inquiry, it believes the Financial Claims Scheme introduced to guarantee bank deposits up to $250,000 is ''a permanent feature of Australia's financial system''.

It supports the proposal of the Labor government to charge financial institutions for access to the scheme, but says the financial system inquiry may decide on a different way to charge for access.