Offering a choice of superannuation fund to more Australian workers doesn't mean they will exercise the opportunity, nor make any better long-term investment decision.
This was one of several views presented by REST Industry Super in its submission to the Royal Commission into Trade Union Governance and Corruption's discussion paper on options for law reform.
In the submission signed by REST chair Ken Marshman, it is pointed out that employees still may not do anything if given more of a choice.
"Many REST members are still school aged and working in their first job. These members tend not to exercise choice and tend to be disengaged given that the preservation rules mean that access to their super is many decades away," the submission said.
Speaking at press conference in Hobart yesterday, Assistant Treasurer Kelly O'Dwyer rejected the idea that super fund choice is a bad idea.
"Your superannuation is your money. The government mandates you putting it into a superannuation fund and you should be able to say where that money goes. So the Government is going to make changes to allow you to make the choices that are right for you and your retirement future because who else is better placed to make those decisions?" O'Dwyer said.
REST has highlighted that if choice of fund was available to all employees, the cost to employers in both time and money spent administering default choices "could prove unbearable for many small employers already struggling under adverse market conditions and be an unnecessary drag on revenues for others."
"These employers may also find themselves acting as "de facto advisers" whereby an employee's choice is not suitable and leads to an employee suffering loss, reduced returns or poorly tailored insurance products, then this may create disharmony in the workplace."
The Financial Services Council (FSC), which mainly represents Australia's retail and wholesale funds management businesses, superannuation funds, life insurers, and financial advisory networks, supports more super fund choice. It said institutional links between super funds with equal representation boards and trade unions gives rise to conflicts of interest that may have a negative impact on consumers.
"The absence of competition in the default superannuation market is to the detriment of consumers as it removes the incentive to attract new members through: lower fees; higher returns; product innovation; and improved member servicing," the FSC submission said.
The super industry and the general public have until January 20 to comment on the federal government's draft legislation that is attempting to extend the choice of super fund arrangements to more Australians.
From 1 July 2016 it is proposed that employees covered under enterprise agreements or workplace determinations can choose their own super fund. This will extend choice to up to 40% of the estimated two million employees who do not currently have choice of fund.
The change also means people with multiple jobs who may currently be forced to maintain more than one superannuation account will be able to consolidate their retirement savings. This would "ensure their savings are not unnecessarily eroded by multiple sets of fees and insurance premiums."
The Assistant Treasurer added the government is keen to see higher governance standards in super as it believes situations highlighted by the Royal Commission "would be much less likely to happen."
Industry Super Australia (ISA) and the Australian Institute of Superannuation Trustees (AIST) have commissioned a review by former Reserve Bank of Australia (RBA) Governor and Treasury Secretary Bernie Fraser to lead the development of a best practice governance code of conduct for not-for-profit superannuation funds by 30 April 2016.
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Read more about...
, Choice of Fund
, Royal Commission
, Financial Services Council
, General Retail
, Ken Marshman
, REST Industry Super
, Trade Union Governance