The Federal Government has signalled that any changes to the default superannuation regime flowing from yesterday’s Productivity Commission (PC) draft report will be a part of a broader suite of changes including those around governance and structure.
While the industry funds strongly criticised key elements of the PC draft report and the Financial Services Council (FSC) gave it a warm welcome, the Minister for Revenue and Financial Services, Kelly O’Dwyer reinforced that the proposed changes to the default fund regime were just one element of a broader process.
Referring to a three-stage process, O’Dwyer said the Government’s final response would be determined by the final report on alternative default models and the outcome of the third stage of the PC’s inquiry.
Both Industry Super Australia (ISA) and the Australian Institute of Superannuation Trustees (AIST) were critical of the PC draft report with ISA chief executive, David Whiteley suggesting the PC had simply delivered in accordance with the Government’s agenda contained in the inquiry terms of reference.
“As requested by the Terms of Reference, the report considers dismantling the most trusted, high performing part of our default system while ignoring the elephant in the room, which is the dismal performance of sales-driven retail funds,” he said. “The Productivity Commission has not provided the public with iron-clad evidence that warrants dismantling a system that has delivered returns almost two per cent more on average each year than other funds.”
For her part, the AIST’s new chief executive, Eva Scheerlinck said the commission had failed to produce evidence that changing the existing workplace-based default fund selection process – currently overseen by the Fair Work Commission – would improve retirement outcomes for members.
Financial Services Council (FSC) chief executive, Sally Loane was far more welcoming of the PC draft report, saying that her organisation supported the Productivity Commission’s view that reform of the default superannuation system was necessary to significantly improve people’s retirement savings.
She noted that the PC had also “resoundingly rejected the current industrial system that directs consumers towards union-dominated default funds”.
“The PC concluded that this 25-year-old industrial model has caused the proliferation of excess accounts and sub-scale industry funds that are draining consumers’ retirement savings,” she said
