The industrial judiciary in the form of Fair Work Australia should continue to play a role in the selection of default superannuation funds under modern awards, according to the Australian Institute of Superannuation Trustees (AIST).
In a submission filed as part of the Productivity Commission’s current inquiry into the default fund regime, the AIST has argued that while solid performance should be at the core of selection of default funds, employers are actually assisted by the involvement of Fair Work Australia.
The submission claimed that the actual performance of funds is more important than competition between funds.
It says the AIST’s concern is not about whether particular types of funds are included or excluded, "but that all default funds listed in awards are solid performers that deliver the best result for members".
"We think that not-for-profit funds will meet this test, while retail (for profit) funds may struggle," the submission said.
The AIST submission also urges the continued participation of the industrial judiciary in the form of Fair Work Australia.
"Employers must be confident that the fund choices they make for their disengaged employees are the right ones," it said.
"Employers will be assisted by having a limited number of funds to choose from. The system has to work not just for employees, but also employers. Getting that balance right is the role of Fair Work Australia.
"The current system has served members well and provides an important safety net. As with other employment entitlements, superannuation issues in awards should be agreed to by industrial parties who have standing before Fair Work Australia."
The submission also urged the imposition of the following selection criteria with respect to default funds under modern awards:
- Past performance based on 10-year rolling net returns (APRA data), assessed against each fund’s investment objectives and target returns;
- Cost-effective insurance and member services suitable for employees covered in the award;
- Transparent fund governance where the role of employers and employees are considered, and assurance that the fund is acting in the best interests of members; and
- Protecting members by not allowing listed default funds to "flip" members into higher fee products on termination of employment.
It said employer and employee associations working together under the umbrella of Fair Work Australia should apply these criteria and draw upon the enhanced super fund performance and other reporting being developed by APRA.
