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Good superannuation policy will not be implemented in haste
The Government risks making long-term policy errors if it moves too far in advance of the Productivity Commission's review of default superannuation funds under modern awards.
As the Government moves further towards debating its Stronger Super changes in the House of Representatives, it has become increasingly clear that, at some point, it will need to make adjustments which take account of the Productivity Commission’s findings with respect to default funds under modern awards.
Any reading of the issues paper published by the Productivity Commission dealing with its approach to its review of default funds under modern awards, confirms that the implementation of MySuper cannot and should not be separated from the outcome of the Commission’s final report and recommendations.
Of course, it is entirely a matter for the Government whether it picks up on those recommendations, but to completely ignore the Commission’s findings would be to ignore the fact that the Productivity Commission reference represented the fulfillment of a promise made by the Government at the 2010 Federal Election.
For the Government to have made such a promise in the context of an election campaign represented an acknowledgement that there were at least some issues which needed to be addressed.
Those issues became magnified in the minds of the broader financial services industry as the Government moved further towards implementation of its Stronger Super policy, particularly MySuper.
It is then worth noting the approach outlined by the Productivity Commission, which appears to extend significantly beyond the brief handed to it by the Minister for Financial Services, Bill Shorten.
In the issues paper released late last month, the Productivity Commission described its approach as including considering “whether to allow all MySuper products to be eligible for nomination in modern awards, or whether there is a net benefit to designing criteria over and above those for MySuper”.
It said that if additional criteria are required, consideration would need to be given to how those criteria would be implemented.
“In conducting its analysis, the Commission will be mindful of the impacts of its recommendations on:
- those who elect to choose their own superannuation fund or product
- the way that default superannuation funds are chosen under enterprise agreements.
The Commission will consult widely with stakeholders, drawing on input from participants through consultations, written submissions and public hearings.
“The Commission will also take into account other relevant inquiries and reviews that are currently underway,” the issues paper said.
In other words, while the Government might not be prepared to wait for the Productivity Commission’s findings before proceeding with the substantial implementation of Stronger Super, the Productivity Commission itself will be weighing the results of the various other investigations currently underway, including the inquiry being undertaken by the Parliamentary Joint Committee on Corporations and Financial Services.
Of course there will be many in the financial services community, particularly those operating within the major ‘for profit’ institutions, who would welcome the Productivity Commission finding in favour of all MySuper products being eligible for nomination in modern awards.
Such a recommendation, if actually adopted by the Government, would eliminate the primacy currently delivered to those funds nominated by Fair Work Australia as a result of its assessment of the current and historic industrial awards regime.
While the Government had good policy reasons for pursuing its modern awards regime, its extension into the realm of superannuation always appeared inconsistent with the manner in which the Australian superannuation industry had evolved over nearly two decades – something which was underscored by the numerous funds which did not gain recognition from Fair Work Australia.
Then, too, the matter became complicated by the controversy which surrounded MTAA Super and its status as a default fund under modern awards.
Whatever the Productivity Commission may ultimately decide, it is hard to escape the perception that there was nothing wrong with the default fund regime which existed before the Government implemented its approach to modern awards and, in doing so, legislated the involvement of the industrial judiciary.
Given the number of Australian workers who find themselves in default fund arrangements, and the number of related policy issues currently before the Parliament, the Government would seem well advised to delay the implementation of its Stronger Super changes until all the relevant moving parts are in place.
The Government may not ultimately like what the Productivity Commission recommends, but it owes it to the superannuation industry and many individual superannuation fund members to await the outcome and adjust its policy settings accordingly.
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