Anger at ruling on default funds
IN A blow to private sector super funds, the Productivity Commission has backed away from a push to give employers more discretion when choosing default super funds for some of the nation's lowest paid workers.
IN A blow to private sector super funds, the Productivity Commission has backed away from a push to give employers more discretion when choosing default super funds for some of the nation's lowest paid workers.Under today's laws, more than $7 billion a year of retirement savings of workers on award wages flows into funds that are chosen by unions and employer groups.For-profit funds complain they are locked out of the market by outdated industrial rules, and have called for more competition in how default funds are chosen.After a nine-month review, the commission reaffirmed yesterday its criticism of the current default super regime, saying employees' interests were not always served and the system was "insufficiently transparent".However, it also scrapped a draft recommendation to give employers more discretion in choosing a default fund, saying the idea was impractical.Instead, it recommended Fair Work Australia decide which funds could be listed as default funds.The chief executive of the Financial Services Council, John Brogden, criticised the commission's change of heart, saying it had "failed to recognise that superannuation is not an industrial matter"."This report is a bitter disappointment and a missed opportunity," Mr Brogden said. "Default superannuation will remain the domain of the industrial system. Twenty years on nothing will change."Mr Brogden represents retail funds, which are keen to manage a bigger share of the lucrative default super market.The Minister for Superannuation, Bill Shorten, sparked controversy during the review when two departments that report to him lodged submissions that argued against giving employers more power to choose funds for their staff, with critics complaining that Labor was trying to influence the commission.Mr Shorten said yesterday he would consider the report carefully before responding.The Coalition's spokesman for financial services, Mathias Cormann, accused the government of "bullying" the Productivity Commission so that the system favoured union-linked industry super funds.The criticism is despite government departments making submissions to the commission under the Coalition, and the commission's reputation for being fiercely independent from government.The chief executive of the Industry Super Network that represents union-linked funds, David Whiteley, said the report had recommended a "transparent, open and merit-based system".