Member interests and not the interests of competing funds is paramount for default super, said FSC and the AIST in their parliamentary submissions.
The Australian Institute of Superannuation Trustees (AIST) and the Financial Services Council (FSC) have both supplied submissions to the current enquiry of the selection and ongoing assessment of default superannuation funds by Minister for Superannuation, Bill Shorten.
Based on the impending launch of MySuper, the review is assessing the current form of default fund appointments.
The FSC made five recommendations in its own submission. The association said that it too agrees that employer choice of all funds is essential to a successful system
"If this were permitted, a designated Fair Work process would not be required as an employer would be free to select any APRA regulated MySuper product," said the FSC.
"This approach has the benefit of removing conflicted industrial parties from selecting default superannuation funds which are approved without proper consideration by Fair Work Australia."
Within its recommendations, the FSC suggested that the choice of funds be extended to all defined contribution members, except where this results in an employer paying twice, if default funds continue to be listed in Modern Awards that conflicted parties should be prohibited from intervening in applications by other funds wanting to be included in a Modern Award, and that any super fund that offers a MySuper product should be eligible to be a default fund.
The FSC also asked that Modern Awards no longer list default super funds by name and for the creation of a dedicated MySuper employer friendly website.
AIST has said that super should continue to be set out in industrial awards and should be agreed to by industrial parties who have standing before Fair Work Australia with member interests of most importance.
"All funds, whether MySuper authorised or otherwise, are able to compete for members who exercise their right to choose a superannuation fund," AIST said in the submission.
"Our main concern is not that a particular sector be 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."
AIST requested that benchmarks for the selection process of default funds be raised beyond the current proposed MySuper criteria to include four new requirements.
They include details of the fund's past performance based on ten year rolling net returns (APRA data), assessed against each fund's investment objectives and target returns, cost effective insurance and suitable member services for or employees covered in the award, transparent fund governance and further protecting members by not allowing listed default funds to flip members into higher fee products on termination of employment.
"As the superannuation industry is rapidly changing, the selection process should be reviewed every four years, as part of the ongoing review of modern awards," said AIST, recommending that the actual selection of default awards be reviewed on an award by award basis.
AIST also supported the push for greater communication from Fair Work Australia as to how the process for selecting default funds works and why funds are both listed and rejected.