ISA says the PC has fallen short

Industry Super Australia (ISA) has rejected the Productivity Commission’s (PC’s) pursuit of a best in show approach to default superannuation, arguing that it overlooks the outperformance of industry funds and the existing industrial default system.

ISA chief executive, Bernie Dean said that the PC’s final report on the competitiveness and efficiency of superannuation had failed to build on the success of the industrial default model and, instead, had persisted in pursuing a ‘best in show’ process.

He said that while the PC report might be considered to have made a welcome start to pursuing much-needed reform, its consumer safeguards were inadequate and ignored big opportunities to boost member accounts.

“In essence the Productivity Commission is abandoning the proven, low-cost industrial default system in favour of a choice-first architecture that has been ground zero for consumer harm,” Dean said. “A workplace default framework is a necessary counterweight to finance sector sales tactics. It needs to be strengthened not abandoned.”

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The ISA chief executive also claimed that the PC’s proposals to prevent cross selling were weak, and that a process to help people out of costly and underperforming products was missing with the PC’s single fund for life approach being misguided.

“Reform is clearly needed but the Productivity Commission misses the mark for the greatest gains,” he said.

Dean said the ISA supported strengthening the current default allocation process within the industrial awards system, which had protected millions of workers from being ripped-off by unscrupulous players.

He said the Fair Work Commission used an expert panel to filter out poor-performing products by fees, costs, net returns, governance and insurance offerings and the ISA believed a similar filter should be extended beyond the industrial awards system.