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New default fund selection a ‘storm in a teacup’
Industry funds typically don't rely on their default option for membership growth, says Independent Education Union general secretary John Quessy.
Addressing an Association of Superannuation Funds of Australia luncheon in Sydney this week, Quessy said the debate about the selection of default funds in modern awards is most likely a "storm in a teacup".
Quessy accepted that the incoming changes to the selection of default funds had the potential to open up more competition in the industry.
Many modern awards currently list only three funds, and that is likely to be increased to 10 when the Government's changes come in at the beginning of 2014, he said.
But according to Quessy, the real question is: "Does it matter?"
"I don't think the industry funds that are represented as default funds in modern awards rely very heavily on the default option for their clientele," he said.
A default fund only comes into play for employees who are covered by a modern award and do not choose their fund, Quessy said.
Those people generally constitute a small pool of employees — or "perhaps even a puddle", he said.
"In my industry that is the case. There would be less than 1 per cent of people in our industry in NSW who are covered by the modern award," Quessy said.
But he accepted that there were a few industries where most employees were under a modern award.
Quessy, who is the former trustee of NGS Super, said that in his experience of enterprise agreements there are generally one or two superannuation funds listed as the default.
"I guess in the process of bargaining — from the union perspective — we largely have an affinity to a particular industry fund. And that's the fund that we would promote, generally because we were involved in setting it up," he said.
"The provider's strong, and we think they've provided excellent returns and excellent service for their members," Quessy said.
He concluded by asking the superannuation trustees in the audience: "What percentage of your FUM do you get from these default processes? I'm not sure that anyone actually knows the answer to that".
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