Govt urged to tighten default fund rules

Employers should be required to give employees a role in selecting their default superannuation funds, and those funds should be reviewed at least every five years, according to law-based industry superannuation, Legalsuper.

At the same time as Government committees investigate the implementation of the Cooper Review recommendations including MySuper, Legalsuper has called on the Federal Government to tighten the rules governing employer choice with respect to default funds.

Legalsuper chief executive Andrew Proebstl (pictured) said that under current arrangements the primary legal obligation on employers was to select a default fund rather than to choose a ‘good’ default fund for their employees.

He said new rules were needed because most Australians continued to accept that the default fund chosen by their employer was the result of the employer having followed due process.

“By increasing transparency and eliminating conflict of interest in the default fund appointment process, the Federal Government can improve the quality of Australia’s default funds and better align the default fund chosen with the interests of employees who, ultimately, are owners of the accumulated retirement savings,” he said.

The call by the LegalSuper CEO has come at the same time as news reports have suggested the Australian Prudential Regulation Authority held concerns about the trouble-plagued industry superannuation fund MTAA Super over a number of years.

The reports also suggested the regulator’s 2010 review of MTAA Super had been “sharply critical” of the super fund’s conduct.