Funds battle over shape of MySuper

A ROW is brewing over key details in the Gillard government's plan to shake up superannuation, as wealth managers lobby Canberra for concessions.

By InvestSMART · 1 Jul 2011

By InvestSMART ·
1 Jul 2011

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A ROW is brewing over key details in the Gillard government's plan to shake up superannuation, as wealth managers lobby Canberra for concessions.

In the biggest overhaul of compulsory super since its introduction in 1992, the government is preparing to make changes it says will cut waste in the $1.3 trillion industry.

However, industry consultation has hit a snag over the rules surrounding MySuper - a new low-cost, no-frills super product to replace default funds in 2013.

Talks between super funds and the government, which are in their final stages, have failed to reach an agreement on whether funds will be required to offer only one MySuper product at a single price, a proposal opposed by retail funds.

The stand-off is likely to leave the Assistant Treasurer, Bill Shorten, to make several key decisions on the shape of MySuper in coming months. The main bone of contention is a proposal from Treasury that funds may offer only one MySuper account at a single price, irrespective of the size of the employer.

For-profit retail funds fiercely oppose the idea, saying it would hurt competition and could raise member fees in funds of large employers. The not-for-profit sector supports Treasury's proposal, saying any cost-savings of scale should be shared equally among all fund members.

The peak industry consultation group, chaired by a former Future Fund general manager, Paul Costello, has failed to reach agreement on the question of pricing and has called a final meeting for Monday in an attempt to reach a compromise.

However, industry sources said the meeting was unlikely to resolve the dispute, and Mr Costello would probably have to advise Mr Shorten that funds were divided on the issue when he reports back to the minister later this month.

MySuper is due to be introduced on July 1, 2013.

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Frequently Asked Questions about this Article…

What is MySuper and when will the new low‑cost default super product start?

MySuper is the Gillard government's low‑cost, no‑frills superannuation product designed to replace default funds. According to the article, MySuper is due to be introduced on July 1, 2013.

Why are super funds and wealth managers arguing over the shape of MySuper?

Industry consultation has run into a snag because wealth managers and different types of funds are lobbying Canberra for concessions. The dispute centers on key MySuper rules as the government aims to cut waste in the $1.3 trillion super industry.

What is the main pricing proposal from Treasury for MySuper accounts?

Treasury has proposed that funds may be required to offer only one MySuper account at a single price, regardless of the size of the employer. That single‑price idea is the main bone of contention in consultations.

Which funds support or oppose the single‑price MySuper proposal?

For‑profit retail funds fiercely oppose the single‑price proposal, arguing it would hurt competition and could raise member fees for large employers. The not‑for‑profit sector supports Treasury's proposal, saying cost savings from scale should be shared equally among all members.

Could a single‑price MySuper raise member fees for some people?

Retail funds argue that forcing a single price could raise member fees in funds serving large employers. The article reports this as the retail sector's concern, while not‑for‑profit funds believe any scale savings should be shared across all members.

Who is leading the industry consultation on MySuper and what happened at the talks?

The peak industry consultation group is chaired by Paul Costello, a former Future Fund general manager. The group failed to reach agreement on pricing, called a final meeting to try for a compromise, but industry sources said the dispute was unlikely to be resolved at that meeting.

Who will make the final decisions about the design of MySuper?

With consultations divided, the Assistant Treasurer, Bill Shorten, is expected to make several key decisions on the shape of MySuper in the coming months, after receiving reports from the consultation group.

What should everyday super members expect as MySuper is rolled out?

Everyday investors should expect changes to default super products as MySuper is introduced on July 1, 2013. The final rules — particularly on pricing and whether funds can offer multiple MySuper products — are still being decided, so members may see announcements once the government finalises decisions.