Industry super funds would lose much of their primacy in the default funds sphere if the Government were to accept the recommendations contained in the Productivity Commission's draft report into default funds under modern awards.
The Productivity Commission has found that there is no case for the selection and ongoing assessment of superannuation for listing as default funds to involve any prescriptive criteria over and above those used by the Australian Prudential Regulation Authority in authorising MySuper products.
The bottom line of the finding is that all MySuper products would be capable of selection as default funds – something which would create further opportunity for major retail players such as AMP Limited and Colonial First State.
The Productivity Commission draft report has recommended a process for the selection and ongoing assessment of default funds as being based on the best interests of members, contestability, transparency, procedural fairness, minimum regulatory burden and the avoidance of instability to the broader superannuation system.
However, the most significant recommendation by the PC is that "all funds that are authorised to offer a MySuper product should be able to apply to be listed in an award and have the application considered on its merits".
Its only concession to the existing regime is that "other factors could be taken into account for individual awards at the decision-maker's discretion".
The recommendation said that employers selecting default funds for employees to whom the superannuation provisions in modern awards apply should be able to choose a fund not listed in the relevant award, but added that, "in this circumstance, employers should be required to justify their choice, if called upon".
The commission has also recommended that there will be an ongoing assessment of the list of superannuation funds in modern awards to ensure that any demonstrably unsuitable, unauthorised or non-existent funds are removed as required.
It has also recommended a "wholesale reassessment should occur every eight years, at which time the full selection process would be repeated and all funds that wish to be listed in awards would need to apply or reapply".
The Financial Services Council was amongst the first to welcome the thrust of the Productivity Commission's report, with chief executive John Brogden saying the Government now had an independent report that said workplaces should not be bound by award default funds.
