The Corporate Super Specialist Alliance (CSSA) is very pleased that common sense seems to be prevailing in relation to default superannuation funds.

In the CSSA’s response this week to the Interim Report of the Productivity Commission Inquiry into Default Superannuation Funds released late last month, CSSA Treasurer Gareth Hall congratulated the Productivity Commission (the commission) for recognising the need for reform in the default superannuation environment.

“It is excellent that the commission realises that the process for the selection and ongoing assessment of superannuation funds for listing as default funds in modern awards needs to be reformed,” he said.

“The Productivity Commission’s desire is to make the process open, contestable and transparent; as this is not currently the case.”

Mr Hall said that in particular the recommendation that, under any circumstance, employers would be able to choose a fund not listed in an award, is quite a breakthrough.

“We feel it is very important to allow employers to be able to tailor their superannuation offering to suit their employees, as the roles of employees that are employed under a particular award can be very diverse,” he said.

However, Mr Hall said the CSSA is concerned about the onus put onto employers to prove that their employees are no worse off.

“We believe that this requirement of proof needs to be carefully quantified so that an employer is aware that they have met the criteria required at the time a fund is selected,” he said, “as if this is not the case this would provide a significant disincentive for an employer to make a selection outside the funds nominated in an award.”

The commission put forward four options as alternatives to reform the selection process, however the CSSA’s preferred option, Option 1, has been ruled out because the commission believes it may be too confusing for employers.

Option 1 involves each employer choosing a fund from all of those that offer a MySuper or other approved default product.

“If MySuper legislation is passed into law and all default superannuation funds must be MySuper funds, then it is very clear to us that there will be no need to nominate default funds in awards as any MySuper fund would, by design, be suitable as a default fund,” Mr Hall said.

“If Option 1 is ruled out, then the CSSA would suggest that the only other viable option is Option 4.”

The CSSA does not support Option 2, which represents a minimal change, where the industrial parties assess all potential funds and nominate a subset of five to 10 funds to FWA for listing in awards.

Option 3 represents a more significant change to the current industrial process, with decisions being made by a Fair Work Australia (FWA) panel — comprising full-time members and part-time experts — and the selection process being opened up to allow all funds to present their case to FWA to be listed in modern awards.

Option 4 is similar to Option 3, but decisions would be made by a new expert body independent of FWA, with FWA playing a minimal role in administering the decision.

“We do not consider Option 3 as viable, as we do not believe FWA has the specific knowledge and the necessary experience of superannuation to be in the position to make decisions as to which funds should be allowed as default funds in modern awards,” Mr Hall said.

“We understand that FWA has been subject to some significant level of criticism in their handling of recent enquiries. Their impartiality has been brought to question and they have taken a long time to come to a conclusion, which would lead us to question if they have the necessary resources to take on this role.

“It therefore seems logical that a new expert body independent of FWA would be best positioned to make decisions on superannuation in Modern Awards.”

2 August 2012