Warning on default funds
The Fair Work Commission (FWC) has been urged to take a cautious approach to its decision-making on default funds under modern awards because of the likelihood that changes will be imposed by the new Federal Government.
The Financial Services Council (FSC) has used a submission to the FWC review of the default fund regime to remind the industrial relations body that the Federal Government has already issued a discussion paper which questions whether the industrial judiciary in the form of the FWC is the most appropriate body to assess default funds.
“If the Government chooses to reform the default fund model the FWC process currently underway may create significant disruption for employers, employees and superannuation funds after 1 January 2015,” the FSC submission said. “It would not be appropriate for the FWC to require employers and default fund employees to change their superannuation arrangements for a short period of time as this would cause enormous dislocation in the market, poor consumer outcomes and significant cost for employers, employees and superannuation funds.”
Elsewhere in its submission, the FSC also points to superannuation fund governance and whether the expert panel appointed to assess MySuper applications “will consider industry best practice, such as the standards set in the ASX Corporate Governance Principles which have been determined as such by twenty one industry bodies”.
“Recommendation 2.1 in the ASX Corporate Governance Principles provides that best governance practices require a majority of a board to be independent directors and Recommendation 2.2 provides that the chair of the board should be an independent director,” the FSC submission said.
“Clearly many superannuation funds operating under the 'equal representation’ model do not comply with what is commonly agreed to be best practice. The FSC is seeking further direction from the FWC on whether this matter will be taken into account by the Expert Panel.”
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