Productivity Commission: Unions slam best in show proposal

ACTU accuses Productivity Commission of “ideological fanaticism,” says best-in-show would hand “a huge amount of power” to financial regulators

Financial services royal commissioner Kenneth Hayne received the PC report before Christmas and is likely to adopt some of the recommendations.

The unions have called a Productivity Commission report which would break the link between superannuation and the industrial relations system “completely unacceptable”, as industry bodies voice concerns about the best-in-show proposal.

A best-in-show proposal would direct new super account-holders’ money into a list of top ten super funds, instead default super going into funds determined under the IR system.

An ACTU spokesman accused the Productivity Commission of “ideological fanaticism” and said it would hand “a huge amount of power” to financial regulators who could select the top ten funds.

“The recommendation to remove superannuation from the IR system is completely unacceptable and shows the ideological fanaticism which underpins this report,” he said.

“The proposed changes would block working people from being represented in the system which manages their money, while handing a huge amount of power to financial regulators which the ongoing Banking Royal Commission has demonstrated are grossly ineffective at shielding working people from banks which regularly put profit before their own customers.

“Any attempt to dismantle this world-class model would inevitably damage the performance of these funds.”

Labor has opposed a best-in-show system in the past due to the hundreds of smaller industry, union-backed funds which may lose out. Opposition treasury spokesman Chris Bowen said today he was concerned best-in-show was uncompetitive and did not account for the future, long-term performance of funds.

Association of Superannuation Funds of Australia chief executive Martin Fahy said he was “disappointed” in the PC report for keeping its recommendation of a best-in-show system.

“The Commission’s core recommendations relating to default superannuation contributions and the nature of superannuation fund membership would dramatically change Australia’s retirement income landscape,” he said.

“ASFA is disappointed that the Productivity Commission has doubled down on the so called ‘top 10 best in show’ as a mechanism for allocating default super. This approach risks creating an oligopoly in default superannuation and reducing long term competition.”

Australian Institute of Superannuation Trustees chief Eva Scheerlinck said the best-in-show proposal was a “blunt mechanism” that would harm both funds and workers.

Their proposal for a top ten default list is a blunt mechanism that will be needlessly disruptive and fails to address the more serious problem of underperformance in the wider super system.”

“According to the Commission, a quarter of default funds underperform but this proposal would deny 90% of funds default status — it will remove many high-quality funds from the default system which may also disadvantage members in these funds.

“Meanwhile, millions of Australians will be left to languish in poorly-performing bank and insurance owned funds that are outside the default system.”