Super fund choice to be expanded under draft legislation

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choice of super fund, super fund choice, exposure draft legislation, Superannuation Legislation Amendment (Governance) Bill 2015: Extending superannuation choice to enterprise agreementsDraft legislation to extend choice of super funds to employees covered by enterprise agreements and workplace determinations has been released by Treasury.

Currently employees covered by some workplace arrangements may not have choice of super fund. The Explanatory Memorandum to the draft bill says:

Specifically, subsection 32C(6) of the SGAA provides that a contribution is made in compliance with the choice of fund requirements if the contribution, or a part of the contribution, is made under, or in accordance with, certain specified industrial agreements, awards, a workplace determination or an enterprise agreement.

The draft legislation, if passed, would mean that employees under an enterprise agreement or workplace determination made on or after 1 July 2016 would have choice of super fund. However, super fund choice would not extend to employees under such arrangements made before 1 July 2016.

Kelly O’Dwyer, the Minister for Small Business and Assistant Treasurer, said the changes would give employees “greater ability to switch funds, if they choose to do so.”

“While most employees can already choose the fund their compulsory superannuation is paid to, in cases where their enterprise agreement specifies a fund, employees have no choice.”

“It doesn’t make sense to force employees to save money in superannuation, but then leave key decisions about how it is managed outside their control.”

The final report of the Financial System Inquiry recommended that super fund choice be expanded. The Government agreed to “extend the choice of fund arrangements to more employees by removing the deemed choice for certain enterprise agreements and workplace determinations.”

The draft legislation is titled Superannuation Legislation Amendment (Governance) Bill 2015: Extending superannuation choice to enterprise agreementsSubmissions close 20 January 2016.

Treasury has also released draft legislation for changes to super fund Portfolio Holding Disclosure and Product Dashboards.

FSC welcomes choice of super fund changes

The Financial Services Council (FSC) has welcomed the proposed changes. FSC CEO, Sally Loane, said: “Consumers will be better off in retirement if they are free to choose their own superannuation fund and are provided with transparent, comparable information to make informed choices.”

“Enterprise agreements are preventing an open and competitive superannuation system where both employers and employees can choose the super fund that best suits their needs,” said Ms Loane.

“Highly performing funds have nothing to fear from competition and giving consumers a right to exercise choice. Competitive markets foster choice, improve efficiency and drive innovation of new products.”

The FSC has been campaigning for greater access to the default super fund system for funds owned by it members, including the large banks.

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