Industry funds baulk at PC’s no defaults baseline
Industry superannuation funds have drawn a line in the sand in the face of a Productivity Commission issues paper suggesting that the existing super default regime is no longer relevant and works from a preferred baseline view of having no defaults.
In what represents the Government's first major challenge to the default funds under modern awards regime put in place by the Rudd Labor Government, the Productivity Issues paper canvasses a range of alternatives and calls for submissions from stakeholders.
However Industry Super Australia (ISA) chief executive, David Whiteley has responded with an attack on the banks over cross-selling in the context of superannuation products and the suggestion that much of the existing default regime should be expanded to cover all employees.
"ISA will urge the Productivity Commission to expand the compulsory super default safety net to cover all employees and design consumer protections to prevent workers being cross-sold under-performing super funds by banks," he said.
Whiteley said the Commission should also undertake a cost/benefit analysis of the interaction between members ‘choosing' and banks cross-selling super products.
"Superannuation is a unique market with public policy objectives. It is different to discretionary financial services like personal loans and credit cards. Social policy outcomes must be front and centre. Consumer protections also should be accordingly higher," he said.
"The public interest is better served by workers being members of a top-performing default fund rather than being sold an under-performing bank or self-managed fund.
"It is now time for the regulatory settings for superannuation to be unambiguously in the interests of fund members. That means designing a default system that accommodates the reality of consumer behaviour and protecting workers from the cross-selling of the banks," Whiteley said.
The Australian Institute of Superannuation Trustees (AIST) also reinforced a "member's best interests" approach, with its chief executive, Tom Garcia claiming default fund selection — overseen by the independent Fair Work Commission — had "worked exceptionally well to protect the interests of an estimated two thirds of working Australians and optimize their retirement outcomes".
The issues paper issued by the Productivity Commission stated that some of the original rationales for the current default architecture were no longer as relevant today.
It said the superannuation system had matured significantly over the past quarter century, with accompanying improvements in transparency and compliance.
"Australians are much more familiar with the concept of superannuation and its workings. However, retirement decision-making remains very complex," it said. "Having no defaults is our preferred, objective baseline for this inquiry."
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