CSSA supports industry preference for default super option
The Corporate Super Specialist Alliance (CSSA) has come out in support of other industry bodies responding to the Interim Report of the Productivity Commission Inquiry into Default Superannuation Funds (the Productivity Commission).
The Productivity Commission put forward four options as alternatives to reform the process for the selection and ongoing assessment of superannuation funds for listing as default funds in modern awards.
CSSA President, Douglas Latto said the Law Council of Australia, the Financial Services Council (FSC) and the Transport Industry Superannuation (TIS) Fund have all recently indicated support for the CSSA’s preferred option – Option 1.
Option 1 involves each employer choosing a fund from all of those that offer a MySuper or other approved default product. If the MySuper legislation passes into law and all default superannuation funds must be MySuper funds, then there will be no need to nominate default funds in awards as any MySuper fund would in fact be a default fund.
“While Option 1 has always been our preferred option, we understood it had been ruled out because the Productivity Commission formed a view that it was too confusing for employers,” Mr Latto said. “However, arguments put forward by the FSC, the Law Council’s Superannuation Committee, and the TIS Fund confirm our view that it makes the best sense.”
In its Supplementary Submission to the Productivity Commission, the FSC preferred Option 1 on the grounds that, “it eliminates the need for any Fair Work Australia (FWA) or other process for listing or delisting funds as every MySuper product would be an eligible default fund at the workplace level.”
The FSC went on to say in its submission that, “Option 1 creates the most competitive market which is in the best interests of consumers/members according to OECD principles.”
The TIS Fund also supports the allowance of all MySuper Funds as Default Super options, saying in its submission to the Productivity Commission that: “… there is no net benefit to designing criteria over and above this, or requiring extra supervision by Fair Work Australia, when MySuper Fund options meet specific criteria already and provide a simple solution.”
The Law Council’s Superannuation Committee went one step further and was recently reported as saying that Options 3 and 4 could in fact lead to worker legal action against the Commonwealth and in a submission to the Productivity Commission suggested Option 1.
Mr Latto dismissed an argument put forward by the Industry Super Network (ISN) that there are too many superannuation funds available to consumers.
“The Productivity Review identified 220 funds,” he said. “Letting employers choose a superannuation fund for their employees helps ensure that it can be specifically tailored to meet the needs of their workplace.”
Mr Latto also said that in holding the returns on industry funds up as shining examples, the ISN is implying that past performance is a good indication of future returns.
“This defies current financial investment logic,” Mr Latto said. “The global financial investment community constantly reminds us that in fact past performance is no guarantee of future returns.”
