Retail funds should be banned from providing default super to employers who bank with them, according to Industry Super Australia (ISA) chief executive David Whiteley.
He also argued they should also be banned from paying shareholder dividends until they have delivered median returns to members.
Whiteley made these two proposals in an address to the National Press Club in Canberra yesterday. Financial Services Council (FSC) chief executive John Brogden also spoke at the event, arguing that ISA's proposed measures would "restrict competition and cement [industry funds'] monopoly position in industrial awards."
Whiteley's speech focused on the role of the Fair Work Commission (FWC) in selecting eligible default funds, which he argued was a necessary "safety net".
Brogden, meanwhile, argued that the FWC system was "anti-competitive" and called for it to be abolished.
Whiteley said: "[The modern awards] system accommodates a 'market failure' in our super system. Eight in ten workers do not choose their own fund. As with all market failure, government intervention is required (the market cannot fix its own failure).
"The disengagement amongst the Australian workforce is in part the reason why we have compulsory superannuation. It is a reflection of logical human behaviour - people tend to discount the future, focusing instead on more immediate financial objectives."
But the banks are opposing this system, he argued, because "they want to leverage their business banking relationships with employers to cross-sell employee default super arrangements, irrespective of the investment returns.
"This model will deliver less, not more, competition and is designed to suit the vertically integrated business model of the four major banks," he said.
The FSC countered Whiteley's comments in a media release entitled 'Industry funds getting desperate,' calling the proposals "protectionist," and "self-interested."
Brogden claimed retail funds had outperformed industry funds since the GFC, adding that the latest MySuper data from APRA supported this trend.
"We cannot continue to have a selection process for default superannuation that allows only unions and employer organisations to determine which funds are selected for awards.
"When you strip away the rhetoric, the industry funds are simply protecting their conflicted and closed shop model," he said.
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