Productivity Commission super report: ACTU accuses PC of 'ideological fanaticism' – The Australian Financial Review
Currently, a Fair Work Commission expert panel has legal responsibility to select a short-list of default funds in awards.
However, the Productivity Commission found the tribunal “viewed itself as a dispute solving body – not as an arbiter of the quality or merit of funds put for inclusion” and that generally only industry funds had been able to have themselves considered for listing.
Transport Workers Union national secretary Michael Kaine said having a government-appointed panel pick super funds was a “recipe for disaster” given “the secret to Australia’s superannuation success is its grounding in the industrial bargaining system”.
“As the Royal Commission focus on bank-owned retail funds has shown, problems arise when unions and employer representative are not involved in scrutinising the choice of a superannuation fund,” he said.
He also argued creating 10 megafunds would “take the ‘industry’ out of industry funds”, which would make it more costly to offer additional services, such as disability and death insurance, because they were purchased at scale.
But despite the union objections, the ACTU highlighted the report “vindicates the union movement’s position that the banks have no place in super due to their systemic under-performance”.
“The report shows what has been repeatedly proven, that industry funds out-perform funds which are run for the benefit of shareholders in the big banks,” ACTU president Michele O’Neil said.
FSC concerns over ‘best in show’
The Financial Services Council, which represents the for-profit retail funds, applauded the commission’s proposal that workers should only default once into a high-performing fund.
FSC chief executive Sally Loane also welcomed the proposed removal of super from the industrial relations system.
“The current system entrenches 1.7 million Australians in poorly performing funds,” she said.
“Giving consumers just one default fund that they can take from job to job will put an end to the endemic problem of multiple accounts – helping ensure members’ retirement savings aren’t being unnecessarily eroded.”
However the FSC had “strong reservations” about “best in show”.
“The FSC is very concerned about the potential unintended consequences for the economy of a ’10 best in show’ model because it could create a monolithic concentration of funds, stifle competition and create huge barriers for innovative new products,” she said.
Best in show ‘disruptive’
The Australian Institute of Superannuation Trustees, which represents non-profit funds, urged rapid action to remove underperformers.
“We agree with the commission that there is no place for underperforming funds in the default system,” AIST CEO Eva Scheerlinck said.
But the lobby group opposes best in show because it is a “blunt mechanism that will be needlessly disruptive and fails to address the more serious problem of underperformance in the wider super system”.
Ms Scheerlinck insisted the Fair Work Commission was the most appropriate, independent body to filter out underperforming default funds.
“In a compulsory super system, consumers must be confident and be able to trust that there is a robust default fund selection system in place,” she said.
“AIST supports an industrially-based selection process that recognises the link between superannuation and wages and is appropriately independent.”