Govt approach on default super funds misleading and incorrect
The Financial Services Council (FSC) has strongly countered the submission to the Productivity Commission which the Government appears to have adopted as its preferred policy approach on default funds under modern awards, claiming it contains incorrect information and misrepresentations.
In a further submission filed with the Productivity Commission this week, the FSC not only contests the key points made by the minister, the Treasury and the Department of Education, Employment and Workplace Relations (DEEWR) but suggests the industrial judiciary actually abrogated its responsibilities with respect to superannuation.
It claimed this abrogation of responsibility by the industrial judiciary, "has led to superannuation funds under investigation by the Australian Prudential Regulation Authority (APRA) being prescribed as default funds simultaneously.
"It is therefore critical that appropriate consumer protection mechanisms exist, and that the process becomes transparent and contestable," the FSC said.
The FSC supplementary submission argues that the Government's preferred position, as outlined in the Treasury and DEEWR submission:
- Proposes the status quo remain, despite the Commission identifying substantive problems;
- Presents a reform proposal which would fail to address contestability, transparency and procedural fairness issues;
- Ignores the ground-breaking changes which are to commence with MySuper and the broader Stronger Super reforms over the next two years;
- Proposes inappropriate roles for other bodies;
- Contains incorrect information; and
- Misrepresents information on the treatment of superannuation in the industrial system.
The FSC submission also argues that the approach being backed by the Government would be discriminatory to small to medium-sized businesses because they lack the scale to be able to easily enter into enterprise agreements and therefore choose alternative default funds.
"Such employers are therefore forced to use the default superannuation fund listed in the relevant award regardless of its efficiency, member and employer service capability," it said.
"With 1.2 million small businesses in Australia, but fewer than 24,000 enterprise agreements registered with Fair Work Australia (which cover multiple enterprises throughout the economy), it is clear that employers do not view this as a simple solution to selecting an alternative default superannuation fund for their employees," the FSC submission said.
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