Default funds denying two million members says FSC

The Financial Services Council (FSC) has hit back at the industry funds’ defence of the current default superannuation fund regime, pointing to research that has found that two million Australian superannuation consumers can’t choose where to invest their super due to “legacy enterprise agreements”.

In a direct attack on the default funds under modern awards regime, FSC chief executive, Sally Loane used her address to this week’s FSC Leaders’ Summit in Sydney to reinforce the need for change, claiming the same research had found that in a sample of Enterprise Agreements, 19 per cent were found to offer no employee choice.

“Modern Awards see to it that 13 per cent of employers are provided no choice of the default fund they can offer employees,” she said. “The research found consumers may be worse off as a result of being defaulted under a modern award or enterprise agreement into a sub-scale, high cost MySuper product.”

Loane said that research had concluded that if the default system was opened up to choice and competition fees would be reduced by $292 million each year, across the 14 million MySuper accounts in existence.

“This is a 13 per cent decrease in total administration fees in the MySuper regime,” she said.

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However, Loane claimed that changing attitudes might overwhelm the default super regime, with the generation now entering the workforce unlikely to put up with a system “modelled on a male in fulltime work and one job all his life”.

“Not for them the paternalism of an employer or union which tells them they must accept the fund chosen for them,” she said. “They are gobsmacked when they call HR and find that they can’t move to a fund they want – whether it’s a new digital disruptor; one that aligns with a personal philosophy, like Australian Ethical; or another mainstream retail or industry fund.”