Retail fund managers eye bigger slice of super pie

Retail fund managers have stepped up a campaign for a larger share of the $10 billion in annual compulsory employer superannuation contributions, challenging the make-up of a Fair Work Commission panel that will consider which funds are included as default options in industrial awards.

The Financial Services Council is seeking an immediate review of an expert panel set up to review default fund applications, claiming it is not properly constituted and should delay hearings.

The challenge comes at a crucial time with applications to the commission to be included as a default super option in industrial awards due to close in two weeks.

The federal Government is also in the middle of a review tasked with improving competition and transparency in default funds.

FSC chief executive John Brogden wrote to the commission on Friday, calling for the expert panel that will review defaults funds to be convened and a challenge to its composition heard.

In the letter to commission senior deputy president Jenny Acton, a copy of which has been seen by The Australian, Mr Brogden says the expert panel does not comply with the requirements of the Fair Work Act and cannot proceed with the review.

The letter could be a precursor to a formal legal challenge by the FSC, which wants to improve the access of its members to the default fund market historically dominated by industry funds.

A spokesman for the commission said the request was “under consideration’’.

Last month commission president Iain Ross sidelined two members of the three-person panel -- Vicki Allen and Stephen Gibbs -- because they were directors of super funds and might have conflicts of interest when ruling on which funds could be listed in awards.

They were replaced on the expert panel by economist Tim Harcourt, who was appointed to the commission as an adviser last year to help on the annual minimum wage review.

But the FSC has argued that appointment leaves the expert panel short of the legislated requirement for three people to sit on the review.

The government has blamed Bill Shorten for the controversy. Employment Minister Eric Abetz has accused the Labor leader of stacking the panel when as workplace relations minister he appointed Mr Gibbs and Ms Allen to the panel shortly before the federal election.

Industry funds have accused the retail funds and major banks that own them of trying to remove filters on fund quality and grab a larger share of the market.

“There is concern that the banks want a ‘free-for-all’ super default funds market rather than a transparent quality filter where only the best funds become default super funds,’’ said David Whitely, chief executive of Industry Super Australia.

“The banks do not want to compete on merit.”

Default funds are considered a significant part of the more than $90bn that flows into super annually because as many as 80 per cent of employees take the default option rather than choosing their own fund.

The default fund review selects a range of funds that can be included in awards based on those approved by the Australian Prudential Regulation Authority and quality filters including performance, fees and governance.

According to a 2012 Productivity Commission review, of the 122 modern awards, 109 listed are a default fund. There were 66 funds recognised of which 46 were industry funds and 11 retail funds.

The government has taken submissions on a review of fund governance and transparency. It is seeking views on whether the Fair Work Commission should continue to be the review body for default funds and whether the market should be open to any organisation offering the low-cost MySuper fund option.