Industry Super Australia welcomes the central findings of the Productivity Commission review into superannuation, that industry super funds and other not for profit funds are the best performing sector.
The Commission proposes that a merit based selection process determine default super arrangements for workers that do not choose their own super fund.
“The jury is now in: industry super funds form a safety net for workers who do not choose their own super fund”, Industry Super Australia Chief Executive David Whiteley said.
“Industry super funds’ record of placing the interests of members is driven by the values and governance of the sector. Industry super funds are deliberately different to bank-owned and retail super funds.
“The job of Government now is to ensure that workers who do not choose their own super fund have their interests protected and are defaulted into an industry super fund.”
ISA expressed caution at the Productivity Commission alternative that another agency be created to shortlist the best performing super funds from which young workers select their fund when they commence their first job, and keep this fund for life.
“Industry super funds have long supported a merit based selection process of default funds. This is currently the role of the Fair Work Commission and is in the best interests of members. Superannuation is deferred wages and a condition of employment,” Mr. Whiteley said.
“To dismantle the Fair Work Commission process in favour of an unproven new government agency and require young workers to choose their super fund for life is high-risk for younger members.
“The ‘super fund for life’ proposal ignores lessons from behavioural economics. Younger workers are most likely to be disengaged from their long-away retirement and the proposal assumes an informed choice.
“The Government should now immediately reconstitute the expert panel at the Fair Work Commission to short-list the best performing super funds. The Productivity Commission terms of reference unfortunately prevented it from thoroughly reviewing the retail choice sector and self-managed superannuation. This is regrettable because these sectors are where the most significant under-performance lies. Recent analysis by the former head of APRA’s research unit has found retail fund underperformance costs members about $10 billion per year.1”
The Productivity Commission’s report focuses on systematic underperformance of the retail and SMSF sector, but its policy recommendations are detached from that analysis, focusing on the default sector, which has performed best.
ISA supports the Government’s intent to reduce the number of multiple accounts and ensure fund members are not paying for insurance they do not need.
ISA is making submissions to the current Government review and will outline suggested improvements to better target the changes. ISA analysis finds that the proposals could lead to millions of workers losing insurance where they are in high-risk occupations, have financial dependents or significant financial commitments such as a mortgage.
Media inquiries: Phil Davey 0414 867 188.
1. Financial Performance Trends of Australian Superannuation System and Sectors, Wilson Sy, 1 March 2018