- Unions insist superannuation is part of wages and an industrial right.
- But the Financial Services Council supports the Productivity Commission’s recommendation to take the decision for allocating default funds away from unions and employers and put it into the hands of consumers.
- However, superannuation funds are worried about a proposal to allocate default super to just the top 10 performers.
Superannuation funds and unions are concerned about reforms to the sector proposed by the Productivity Commission and appear to be preparing to battle some of the changes.
The latest reactions open a new front in the ongoing war between industry super and the retail funds operated by the banks and AMP.
The funds say the proposal to allocate default superannuation to 10 so-called “best-in-show” funds raises questions about innovation, competitive intensity and diversity.
The Productivity Commission proposes that everyone should also be able to choose a fund from a list of high-performing funds identified by an independent and expert panel.
Dr Martin Fahy, CEO of the Association of Superannuation Funds of Australia, says any change to the system needs to recognise the diverse needs of fund members.
“Members’ needs differ widely, including with respect to their occupation and their location,” says Fay.
“In particular, many smaller funds are able to provide niche offerings to their members, including tailored insurance and investment options, and the importance of this to members should not be underestimated.”
Meanwhile, peak union body the ACTU says superannuation is an industrial right and comes from workers’ deferred wages.
“The link between employers, unions, workers and their funds has been a key reason why industry super funds have systemically out-performed bank-owned super funds, and a pillar of the success of our retirement system,” says ACTU Assistant Secretary Scott Connolly.
“Working Australians built superannuation and it belongs to working Australians. At all times the interests of members must be put first.”
The ACTU says reforms should also include the extension of employer-paid superannuation to all workers, including contractors and those in the gig economy, and the urgent increase of the super guarantee to 12%.
“The report does not go nearly far enough in its condemnation of for-profit funds, which have proven they should be banned for our system entirely due to high fees, low returns and massive scandals uncovered at the Banking Royal Commission,” says Connolly.
Compulsory super was announced in the Hawke Government’s budget of 1991 and became law in 1992. The initial deal was that employees forego a pay rise to get 3% in superannuation.
The Financial Services Council supports the recommendation to take the decision for allocating default funds away from unions and employers and put it into the hands of consumers.
“The Productivity Commission is Australia’s credible, independent economic voice and its root and branch analysis of our 27 year old mandatory superannuation system has found that in the main, the system is working well for most Australians,” says CEO Sally Loane.
“However it has found that a key driver of poor outcomes is having default funds tied to employers and workplace relations through enterprise agreements and modern awards. They note that this has worked in favour of the funds, not consumers.”
She says giving consumers just one default fund that they can carry from job to job will also address the chronic problem of multiple accounts.