The Productivity Commission on Fri 29.6.2012 released a draft report as part of its inquiry into the selection and ongoing assessment of default superannuation funds in modern awards.
- The Commission’s preliminary finding is that there is no case for using prescriptive criteria for selecting and reassessing default funds in modern awards.
- It also found that the selection process currently used for listing default funds has generally delivered above-average returns for members, with a measure of transparency and few regulatory burdens.
- However, the Commission acknowledged that the selection process involves shortcomings.
The Commission’s Deputy Chairman, Mike Woods, said a number of factors need to be considered, especially the appropriateness of each MySuper product’s investment return objective and risk profile, and each fund’s expected ability to deliver on that objective. Other factors include the appropriateness of fees, conflicts of interest, members being switched (or “flipped”) to higher cost products upon ceasing employment, quality of advice and insurance. The Commission also said that employers should be able to choose a fund that is not listed in an award, provided they can demonstrate that their employees are at least no worse off.
The Commission is also seeking further comment on an alternative option for decisions on default funds in modern awards to be made by an expert panel within Fair Work Australia or via a new independent expert body.
SUBMISSIONS on the draft report are due by 3 August 2012 – email: default.super@pc.gov.au. Public hearings will also be held in Melbourne (30 July 2012) and Sydney (31 July 2102). The final report is expected to be delivered to the Government by 6 October 2012.
[LTN 124, 29/6]