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Default superannuation fund change would pressure employers
Major hospitality industry super fund, Hostplus has warned against allowing MySuper funds being automatically named as default funds under modern awards, arguing it would place too much moral responsibility on employers.
In a submission filed as part of the Productivity Commission review of default funds under modern awards, Hostplus argues that changing what is currently a successful model "would certainly provide a financial benefit to the retail superannuation fund and banking sectors" but adds, "however, it is hard to see what benefits would flow through to the types of workers employed under an Award".
The Hostplus submission argues that the approach being pursued by some retail funds "would require employers to research and decide on a super fund for their workers from literally hundreds of different funds".
"For many employers this will be a task beyond their means and they will need to either enlist the services of an external consultant or hastily make a decision that may prove not to be in the best financial interests of their employees, but yet still meet their obligation to select a default fund," it said.
"We are informed by our employers that many simply do not have the time or resources to undertake such a task and fear if such a task was imposed upon them they would bear the moral responsibility for an important decision that is currently shared between industrial parties in consultation with their members."
The Hostplus submission acknowledges the improvements inherent in the MySuper regime as being important to workers but adds, "Unfortunately these changes are not sufficient to protect those employees and employers that rely upon the default fund arrangements".
"We are particularly concerned with the apparent acceptance of the practice of member 'flipping', and the absence of appropriate controls over insurance costs to MySuper members," it said.
"The practice of providing artificially low prices with a view to recouping this loss and making additional profits when an employee leaves their employer, is known as 'flipping'. This is an issue of primary importance within our industries, given very high employee turnover rates.
"We believe it is not acceptable to allow a fund that undertakes this practice to be allowed to be named as a default fund," the submission said.
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