The government released a discussion paper yesterday that seeks industry feedback on a number of issues affecting the superannuation industry, including the independence of trustee boards, the MySuper product dashboard, portfolio holdings disclosure and the selection of default funds under modern awards.
The selection of default funds is currently overseen by Fair Work Australia via measures put in place by the former Labor government, but that could be set to change under the Coalition.
Speaking at an FSC breakfast in Sydney yesterday, assistant treasurer Arthur Sinodinos said that “more competition and more informed consumers is a good thing”.
“Why shouldn’t any [default superannuation] fund that meets certain basic requirements be able to be selected [within] awards?” he asked.
FSC chief executive John Brogden, who lobbies on behalf of bank-owned retail funds, “commended” the discussion paper and said that “without competition, default superannuation will remain uncompetitive, conflicted and lacking transparency”.
“Superannuation is a financial product and should not be the subject of decisions by Fair Work Australia. This process is inefficient and costly and remains riddled with conflicts,” he said.
“Over two million Australians are not currently benefiting from competition in default superannuation. This has led to limited member services, fee pressures and lack of product innovation.”
Industry Super Australia (ISA) reacted warily to the discussion paper, which it said “canvasses the views of the industry to potentially remove or weaken merit-based selection of default funds”.
“The government is considering removing a merit-based filter undertaken by an independent expert panel within Fair Work Australia to require employers to select from any of an estimated 100 MySuper funds,” the ISA said.
Few employers have the “time or expertise” to choose from 100 MySuper funds – the current system provides employers with a list of up to 15 funds – the ISA said.
Member returns should be central to any proposed changes, the statement said.
“Funds with the representative trustee structure are run only to benefit members, and have outperformed retail super funds – typically run by banks – over the past 16 years by an average of 2.3 per cent per year, according to the regulator, APRA,” said ISA chief executive David Whiteley.
“It is absolutely critical that only the best performing funds make the cut [in modern awards]. Industry SuperFunds are concerned that these proposals will remove an important merit-based process which is transparent, independent and places a premium on member returns,” he said.
