Industry super funds say the existing system for choosing default super funds is working well and ask if the potential move to a competitive model is ideologically motivated.
The Productivity Commission is conducting an inquiry into alternative models for choosing default super funds. However a submissions from industry super funds support the current system.
“The superannuation system is functioning well and leading to better retirement outcomes for Australian workers. There is little to be gained and much to be lost by continuing to tinker with a system that is not broken,” said Vision Super, in its submission.
Several of the industry super fund submissions go on to ask if changes to default super are ideologically motivated.
“Governments need to be asking whether seeking changes based on ideological grounds, such as increasing competition or changing default arrangements, will benefit consumers more than the changes further undermine the system,” said Vision Super.
A joint submission by Club Super, QIEC Super and IFAA said: “…we consider that the existing default system is effective and does not need to be abandoned. This raises the question as to whether the argument to impose a competitive model, and to uncouple default fund selection from the workplace relations system, is more ideological than evidential.”
Industry super funds were also critical of the Productivity Commission choosing ‘no defaults’ as the baseline comparison for alternative models, as opposed to the existing system.
The Issues Paper, released by the Commission, says: “Importantly, the emphasis is on developing alternative models. This inquiry is not a review of MySuper or other current default arrangements. In assessing alternative allocative models, this inquiry will therefore be starting from an objective baseline scenario of no defaults. The efficiency and competitiveness of the current system will be reviewed in stage 3, which the Commission will be asked to undertake following the full implementation of the MySuper reforms (that is, after 1 July 2017).”
AustralianSuper says this is a “flawed” choice. “It is completely impractical to consider no defaults as a baseline comparator against alternative default models – the current default system should be considered in the first instance”.
However not all submissions were so supportive of the current default super selection system. The Institute of Public Affairs (IPA) calls for the immediate repeal of “any legislation or regulations that prescribes a role for the Fair Work Commission, trade unions or employer organisation in the selection of default superannuation funds”.
“There should be no role for an employer, trade union, employer organisation or government entity such as the Fair Work Commission to choose where an employee invests their own retirement savings.”
“There is little doubt that the current legislative framework creates a significant advantage for superannuation funds that have a footprint in the workplace relation system.”
The IPA instead proposes that the Government conduct a tender process to select between two and five super funds to be given the right to be default funds for a set period.
“This process should be open to existing retail and industry funds, as well as to new competitors, including from overseas, that are approved by an appropriate body such as the Australian Prudential Regulation Authority (APRA).”
The IPA goes further in its submission, calling for the abolition of compulsory superannuation.
“If compulsory, employer-funded superannuation contributions were to be abolished, then there would be no need for employers to work out where to pay these contributions, and if an employee wished to save money into a superannuation account, he or she could either nominate where the employer may deposit it, or conduct the transaction themselves.”
Though the IPA acknowledges that this is “not currently on the agenda” and so there must be a system for selecting default super funds.