Remove awards and allow MySuper to blossom
The MySuper regime has not been allowed to operate in an open market and therefore provide the best outcome for employers and employees, according to Workplace Super Specialists Australia (WSSA).
The WSSA has used its submission to the Productivity Commission inquiry into Alternative Default Models to argue strongly for the removal of the industrial judiciary and the modern awards regime from the default fund provcess.
It argues that the employer is the entity best positioned to select the default super fund on behalf of its employees because the employer best understands the culture, demographics and requirements of its own workforce.
"The factors influencing fund selection vary too widely within an award and it makes sense that fund selection should be based on the requirements of a workforce," the submission said.
"With 122 awards there is effectively 122 default fund lists, each limited and different. Larger employers may have a number of awards that apply to them and have to choose different default funds for different groups of employees. This prevents them from negotiating a reduced administration fee that would be applicable if all employees could have one default fund."
"These restrictions have resulted in MySuper not being able to operate in an open market," the submission said.
"The current MySuper model (if it operates on a level playing field where any MySuper fund can be a default fund regardless of awards), allows for and promotes open competition between funds. It allows product innovation to occur."
The WSSA submission claimed that under such a regime, over time "the cream will rise to the top".
"Employers and their employees will be able to select from funds with proven track records of performance after fees. This open architecture will provide system stability as any fund provider can compete on equal terms rather than this being the domain of the chosen few, and new entrants will be able to enter the market," it said.
The WSSA submission also argued that there was no need for the imposition of a further filter to determine the appropriateness of funds.
"There is already a ‘filter' to determine which products are eligible to be used as default funds; this is the MySuper legislation which was designed specifically for this purpose. Applying a further filter seems costly, inefficient and unnecessary," it said.
Recommended for you
Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
The firm has announced it will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels, citing a declining market and risk adviser numbers.
