The Minister for Employment and Workplace Relations and Minister for Financial Services and Superannuation, Bill Shorten, today announced measures that will improve the transparency and contestability of the selection of default funds in modern awards.
The measures are contained in the Fair Work Amendment Bill 2012, introduced by the Minister into the Parliament today, are the Government's response to the Productivity Commission's inquiry into default superannuation funds in modern awards. This inquiry was initiated by the Government in January 2012.
The Productivity Commission found that that existing default fund arrangements have resulted in net returns generally exceeding those of non-default funds. Over the eight years to 2011, default funds in modern awards have averaged an after-tax return of 6.4 per cent, compared with 5.5 per cent for non-default funds.
"The primary focus must be the interests of members, but it's also important that the process of fund selection is transparent and contestable and workable for all parties," Mr Shorten said.
All funds with a generic MySuper product will be able to apply for selection as a default fund on an equal basis, which will bring greater contestability to the system.
An Expert Panel within the Fair Work Commission will assess funds on the basis of legislative criteria which are based on those proposed by the Productivity Commission.
The Expert Panel will then decide which funds meet the criteria in an open and transparent process.
A Full Bench of the Fair Work Commission will then determine which particular funds from the Default Superannuation List are best suited for inclusion in each modern award, with the best interests of the employees covered by that particular award as their overarching consideration.
This process will occur every four years, to align with the four yearly reviews of modern awards. It will ensure that the default funds listed in modern awards continue to be the best performing MySuper funds.
"This Bill reflects the Gillard Government's ongoing commitment to providing a superannuation system that operates to maximise the retirement incomes of Australian workers, and a strong and stable modern award safety net," Mr Shorten said.
The Minister said the Government had already legislated to lift universal superannuation from 9 to 12 per cent, abolished the tax paid on superannuation for 3.6 million Australians earning less than $37,000, and abolished the age limit on earning superannuation.
"Superannuation is a critical part of the Australian safety net. It provides income for working Australians in their retirement, helping them to retire in comfort and with dignity. It is therefore vitally important to make sure the default superannuation provisions in modern awards are simple and workable for employers and operate in the best interests of Australian workers."