The Association of Financial Advisers (AFA) is extremely disappointed with the final report from the Productivity Commission Inquiry into Default Superannuation Funds released on Friday.
“The Productivity Commission has backed down from the strong pro-competition, pro-choice and pro-transparency position they took in their interim report and appear to have given in to pressure from the Minister for Financial Services and Superannuation, Bill Shorten,” said AFA President, Brad Fox. “The Productivity Commission set the industry up with high expectations only to let everyone, especially Australian workers, down.”
In August, Minister Shorten publicly supported a submission to the Productivity Commission compiled by two of his own departments – Treasury and the Department of Education, Employment and Workplace Relations – which advocated for the continued involvement of an expert panel with Fair Work Australia (FWA).
“We are very concerned about the influences on superannuation policy and we question, as we have previously, the appropriateness of FWA making decisions with respect to the selection of superannuation funds in modern awards,” Mr Fox said. “FWA has been running the system to this point and it has not worked.”
Mr Fox said it is difficult for the superannuation industry to have confidence in FWA because there is a widely held view that FWA lacks independence.
“The expert panel will be dominated by FWA, it will be chaired by the FWA President and FWA will appoint the part time members. How can the industry have confidence in a solution that is back to the past and more importantly, how can workers have faith in superannuation?”
Mr Fox said the loss of the option for employers to choose a fund is a very big disappointment, particularly to Australia’s small to medium size business owners.
“If employers want to select a fund that suits their workplace and they accept the responsibility to protect the interests of their employees, then they should be allowed to,” he said. “At the end of the day, if the government is setting the criteria for MySuper funds, then any fund meeting that criteria should be able to be selected as the default fund for a workplace. By keeping superannuation as part of the industrial system and giving the power of selection to FWA, the value of competition is being lost to what is potentially a closed-shop solution.”
Mr Fox also said workers’ confidence in superannuation is falling and transparent policy settings are essential to help restore it.
“There is great fear from workers and retirees that the government will use superannuation as a short term budgetary solution at the expense of the long term funding it is intended for. This Government-driven, anti-competitive influence over the choice of super funds undermines trust in our superannuation system.
“Competition is the cornerstone of efficient markets, where price and performance can be brought to bear – the MySuper arrangements and the default superannuation model are working together to effectively reduce competition, giving Australians inadequate choice in default funds. This will ultimately lead to sub-optimal outcomes for Australian consumers.”
