Industry Super Australia (ISA) has mounted a further defence of the existing default funds under modern awards regime in the face of the Productivity Commission’s draft report on the competitiveness and efficiency of the superannuation system.
ISA chief executive, David Whiteley, claimed that there was evidence that those superannuation fund members who actively made choices about their superannuation funds were not necessarily being as well served as those falling within the default system.
“There is ample evidence that many who currently make an active choice are choosing funds that do not deliver the best net returns,” he claimed.
“This is due to an overwhelming and confusing array of funds, high search costs, multiple advice channels and 40,000 investment options, many of which are designed to generate profits for companies, not the customer.
“Where consumers have been inundated with choice, there has been little sign of a corresponding drop in fees or better net returns,” Whiteley said.
He said the PC draft report had noted that these are “potentially signs of unhealthy competition.”
“Looking after the compulsory super savings of Australians requires funds to be of the highest quality and exhibit undivided loyalty to members,” Whiteley said, claiming the PC report had identified that member outcomes, measured by net returns and ultimately how much they have in retirement, had to be the primary focus of a well-designed super system.
“There is a moral and fiscal imperative to get default settings right. An estimated eight million workers rely on being placed in a default fund, usually by their employer, and don’t actively make a choice,” he said.
