- published on 22/05/2013
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Industry superannuation funds could lose their claim on billions in new cash flows as the Productivity Commission seeks a new way of choosing workers’ default funds based on MySuper.
Industry funds’ preferred status saw them gain much of the $3.5 billion in superannuation payments made through industrial awards in 2010, according to the Productivity Commission. Now, they risk losing similar inflows in the future as the way default funds for workers are chosen is changed.
The draft Productivity Commission report, Default Superannuation Funds in Modern Awards, seeks transparency and consumer protections in the default-super market. It says criteria for default funds under MySuper legislation funds can be used to choose and monitor funds for awards.
MySuper requires registered superannuation entities to offer default funds meeting standards for investment strategy, cost and fund size that are set by the Australian Prudential Regulation Authority (APRA). It is slated to begin on July 1, 2013. Other factors – such as fees, insurance and the provision of basic and complex financial advice – should be considered, the report says. Information about the quality of fund governance – including guards against conflict of interest, the likelihood of members being moved into high-cost divisions of the fund or being charged large fees upon retirement – will also be sought.
Modern industrial awards specify default funds into which employees’ pay super if they do not choose a fund themselves. Of the 67 listed default funds covering 102 awards, 46 are industry funds, 11 are retail funds, seven are public sector funds and three are corporate funds. AustralianSuper, which is the country’s largest industry fund with $46 billion, is the most listed with 69 awards.
The Productivity Commission seeks input from funds and other industry stakeholders on two options for choosing default funds in modern awards: that all funds be allowed to apply for inclusion by a panel of Fair Work Australia, or a new body that is independent of FWA be created with the sole purpose of choosing and assessing funds. The options allow employers to choose a fund not listed in an award if they can prove employees are not invested in a bad fund.
REST Industry Super, which draws about 45 per cent of its 1.9 million members from industrial awards, supports MySuper standards as the basis for inclusion.
REST, the fund for retail-industry employees, says industry funds’ knowledge of “the needs of a specific industry” beats a one-size-fits-all approach for default funds in awards.
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