CSSA: Modern awards restrict employer choice
The Corporate Superannuation Specialist Alliance (CSSA) submission to the Productivity Commission Inquiry into Default Superannuation in Modern Awards suggests that the vast majority of employers want to provide the best outcomes they can for their employees.
According to CSSA President, Douglas Latto, in most cases, employers view superannuation as an important part of their employees’ benefits and they appreciate the ability to be able to add value for their employees by tailoring a superannuation solution to suit their needs.
Mr Latto said, “Many employers see their default superannuation offering as being a differentiating factor for their company, a tool for them to attract and retain staff – to become an employer of choice.”
The CSSA believes that the current Fair Work Act provisions are not providing employers with sufficient choice and flexibility. In many cases, if a superannuation fund is not nominated in an award, it is practically impossible for the employer to choose to use that fund as a default fund
unless they put an enterprise agreement in place, a costly and complicated process that is not appropriate for most small to medium employers.
Even if practicable for an employer, enterprise agreements can have the negative side effect of removing an employee’s ability to select their own arrangements under ‘choice of fund’ legislation.
“What we’re seeing with many of the employers we deal with is a decision to take advantage of grandfathering arrangements and retain their existing default fund. Very few have actively changed their default funds to those nominated in the relevant award,” said Mr Latto.
“The feeling among employers is that the current process of default fund selection is opaque. It is restricted to a small number of, predominantly industry, super funds.
“This is leading to a stifling of competition and, therefore, cost savings are not necessarily flowing through to fund members. In some instances, the fees charged by listed default funds are not as competitive as other funds and, in an environment where fees are generally falling, some fees have actually increased.
“An environment where employers find it too difficult to research alternative solutions for their employees, and opt to simply stay where they are, will eventually lead to a stagnancy in the market, and, ultimately, member benefits not evolving to keep pace with changing retirement demographics.”
The CSSA submission to the enquiry also questioned the validity of the MySuper legislation. “While we do not agree with the concept of MySuper, if the 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. If this is not the case, we certainly do not see the point of the MySuper legislation at all.”
Mr Latto went on to say that, “the CSSA is continuing to work with all stakeholders to achieve a solution that will better benefit employers and their employees”.
