What is the annual value of fund flows into the industry funds which make up the majority of default funds sanctioned by the Fair Work Commission under the default funds under modern awards regime?
When you find the answer to that question, then you begin to understand why the Productivity Commission’s current examination of alternative default models will represent a fulcrum for the debate which has raged between the Financial Services Council (FSC) and Industry Super Australia (ISA) for most of the past eight years.
There can be no doubting the direction in which the Federal Government wants the PC to head. The terms of reference delivered to the Commission by the Federal Treasurer, Scott Morrison, make it very clear that alternatives need to be found to the current model.
The preamble to the PC’s discussion paper on alternative default models lays down the ground rules stating: “The Productivity Commission is to examine alternative models for a formal competitive process for allocating default fund members in the superannuation system to products and to develop a workable model, or models, that could be implemented by Government if a new model for allocating default fund members to products is desirable.
“These model(s) would provide viable alternatives for the Government’s consideration, depending on the outcomes of the review of the efficiency and competitiveness of the superannuation system, which the Productivity Commission will be asked to undertake following the full implementation of the MySuper reforms”.
The reference to the MySuper reforms is important because it coincides with the Liberal Party’s policy that the default funds regime should be removed from the jurisdiction of the Fair Work Commission and should be opened up to all appropriate MySuper funds approved by the Australian Prudential Regulation Authority (APRA).
The PC’s issues paper has now been open to industry stakeholders for nearly a month and while response submissions have been slow to emerge, the industry funds have already made clear they will be fighting for the retention of the status quo while the FSC will be fighting for the system to be open to all eligible MySuper funds.
The PC will not be producing its draft report until early in 2017 and it is unlikely a final report will be developed before the middle of next year but at least some change seems certain in circumstances where it will be open to the Government which particular recommendations it decides to adopt.
