Default Superannuation Funds

Default super fund tender could save $1 billion a year in fees

Independent think tank the Grattan Institute says that implementing a tender process for selecting default superannuation funds would save $1 billion in fees a year.

The Grattan Institute puts the current cost of the superannuation system at $21 billion per year in fees and expenses, $16 billion relating to APRA-regulated funds and another $5 billion for SMSFs. The report, titled Super Savings, says both administration and investment fees are too high.

Read More »Default super fund tender could save $1 billion a year in fees

Regulator can’t penalise enticing default super fund switching

Industry Super Australia has obtained legal advice which says regulators have no power to seek a civil penalty from banks unlawfully offering incentives to persuade employers to switch default superannuation funds to a bank-owned fund.

“The law (SIS Act section 68A) prohibits a bank from offering business banking discounts and other incentives to employers in exchange for access to employees’ superannuation,” said David Whiteley, Chief Executive of Industry Super Australia (ISA).

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Employers can receive benefits for switching default super fund

Banks, and others, are allowed to offer some goods and services to encourage employers to switch the default superannuation fund for their employees.

Following the release of research pointing to major banks offering benefits to employers to encourage switching of super funds, there has been significant press coverage of the issue. Some the reporting has said that such benefits are banned, however there are some exemptions.

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Banks give benefits to employers to switch default super funds

New research released by Industry Super Australia (ISA) shows that banks may be offering benefits to employers to encourage them to switch default superannuation funds.

The survey of 550 small and medium businesses, conducted by UMR, showed that “26% of employers surveyed said that a major bank had approached them about transferring their employees’ default superannuation to the bank’s own retail super fund in the last year,” according to the ISA.

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Financial Services Council rejects super safety net claims

In response to claims by Industry Super Australia that recent reviews of the superannuation system had supported the current system for choosing default superannuation funds the Financial System Inquiry has written a letter to the editor of The Australian:

Re: End default super battle, retail funds told

Industry Super Australia’s claim that “a series of reviews had already endorsed existing arrangements” for default superannuation under Modern Awards is wrong. (”End default super battle, retail funds told”, The Australian, February 5). The reviews have in fact been critical of the role of the Fair Work Commission in selecting default funds.

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Only 5% of super funds in modern awards are retail funds

Retail super funds make up only 5% of MySuper funds included in modern awards, according to the Financial Services Council (FSC).

An analysis of the modern award system by the FSC shows that industry, government and corporate super funds account for 95% of the MySuper funds included in the 122 modern awards.

The FSC claims this shows that “modern awards suppress competition in the superannuation system to the detriment of consumers.”

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Government wants to give super system to the banks: ACTU

The ACTU says the Federal Government has “sent a clear message it intends to put the interests of the big banks ahead of working Australians by attacking industry super funds.”

“It’s astounding that new Assistant Treasurer Josh Frydenberg’s first public comment on superannuation is to attack the one area of the finance industry that actually puts the interests of millions of Australians ahead of the big banks,” said ACTU Assistant Secretary Tim Lyons.

Josh Frydenberg had said, to the Australian Financial Review, “I don’t have a lot of faith in the current system.”

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Super safety net under threat from changes to default super

Industry Super Australia Chief Executive David Whiteley has used a speech to the National Press Club to argue that the superannuation safety net is under threat.

The National Press Council on Wednesday was the latest forum for the continuing fight between the Financial Services Council and Industry Super Australia over default superannuation funds.

Opening the speeches David Whiteley said that “the heart of our super system has been the default super safety net.”

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Industry vs retail fight over default super funds to continue

The fight over which funds will be default super funds is set to continue, despite a ruling by the Federal Court of Australia.

Federal Court – FSC v Industry Super Australia

The Federal Court of Australia has published the reasons for ruling that the expert panel to determine default super funds under modern awards was improperly constituted, in the case of Financial Services Council Ltd v Industry Super Australia Pty Limited [2014] FCAFC 92.

This Expert Panel of the Fair Work Commission (FWC) was tasked with conducting a review of the default super funds in modern awards, as part of the MySuper changes. The panel is required to comprise either the President of the FWC or someone appointed in the presidents place; at least three experts in the subjects of superannuation, finance or investment management; and three other members of the Commission, who don’t need to be experts.

For this panel the President chose to appoint the Deputy President to sit in his place, and appointed the other members. The issue arose when two of the three expert members of the panel were disqualified due to a conflict of interest and in their place the President appointed another expert and himself to sit on the panel.

Read More »Industry vs retail fight over default super funds to continue