While the Banking Royal Commission has been stealing headlines as it unveiled various rorts and con jobs in the financial services sector, the Productivity Commission was quietly working away in the background and has produced a report that could turn Superannuation on its head.
As my readers would all know, Superannuation contributions are made either to a complying fund of the employee’s choice or to a complying default fund which, in most cases, is an industry fund (C-Bus, Australian Super, HESTA, Maritime Super etc.). In most workplaces employees are happy to run with the default mechanism so a significant amount of contributions find their way to industry funds through the default process.
The Productivity Commission has recommended that all this needs to change. Instead of Awards and EBAs nominating industry funds for default contributions, the Productivity Commission suggests that the default funds ought to be the top ten performing funds for the past year in question. It’s been called the “Best in Show” option.
The trade union movement has not reacted well to this recommendation. The ACTU has called it “ideological fanaticism”. The Association of Superannuation Funds of Australia doesn’t like it either because it can see that many smaller industry funds might find their entire existence threatened. I cannot see the Labor Party supporting this in any way. It is highly likely to become an issue in the 2019 Federal Election.
Will the Federal Government go into bat and try to pass legislation that implements the Productivity Commission recommendations? They might well do so. There’s a deep seated belief in the current Government that trade unions ought not be allowed anywhere near Superannuation. That belief might drive the Government to legislate with a view to dramatically reducing the role (and the worth) of industry superannuation funds in general and trade unions in particular.
I think this will be a much bigger issue than many people might imagine. The Productivity Commission report has been released during the usually sleepy time of January in Australia (perhaps deliberately). It might be sleepy now but it won’t stay that way. My feeling is that this will be a big issue for a while.