Productivity Commission proposal leaves consumers exposed
Not-for-profit superannuation funds outperform retail funds, and the existing industrial default system provides strong member protections, a Productivity Commission report released today confirms.
Yet, rather than build on the industrial default model which has produced Australia’s top-performing funds, the Commission has recommended replacing it with a competitive ‘best-in-show’ process.
Industry Super Australia chief executive, Bernie Dean, said while the Productivity Commission had provided a welcome start for 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,” said Dean.
“A workplace default framework is a necessary counterweight to finance sector sales tactics”.
“It needs to be strengthened not abandoned”.
“Proposals to prevent cross selling are weak, and a process to help people out of costly and underperforming products is missing”.
“A single fund for life is misguided and won’t actively connect people to the best funds at all points during their working life”.
“Reform is clearly needed but the Productivity Commission misses the mark for the greatest gains,” he said.
Industry Super supports strengthening the current default allocation process within the industrial awards system, which has protected millions of workers from being ripped-off by unscrupulous players.
The Fair Work Commission uses an expert panel to filter out poor-performing products by fees, costs, net returns, governance and insurance offerings.
Industry Super believes a similar filter should be extended beyond the industrial awards system.
On the unintended multiple accounts, Industry SuperFunds are taking the lead to consolidate around half a million duplicate accounts that will boost member balances.
The report is the culmination of a three-year Productivity Commission review into the superannuation system’s competitiveness and efficiency.
Bernie Dean is available for interview by phone. Media contact: John Hill 0412 197 079