Chris Pearce (Aston, Liberal Party, Shadow Minister for Financial Services, Superannuation and Corporate Law) Share this | Hansard source

I want to take this opportunity to speak to the Fair Work (Transitional Provisions and Consequential Amendments) Bill 2009, and the related bill, just for a few minutes, as it relates to the area of superannuation and the selection of so-called default funds as a result of the award modernisation program. That is the particular area that I want to touch on this morning because, as shadow minister for financial services, superannuation and corporate law, what has resulted from this government’s policies is of great concern to me, and it is of great concern to many Australians. As the shadow minister for employment and workplace relations has foreshadowed, the coalition intends to move an amendment that would provide for the employer to be able to nominate any complying superannuation fund as the default fund.

The so-called award modernisation program and the selection of default funds is a very interesting process. It is a process that I have been very critical of because I believe that it fundamentally undermines choice and competition in the Australian superannuation industry. It is because of that fundamental undermining that I have such a degree of concern about it. There are many questions that arise from the way that the process operates at the moment. There are questions like: should competition between all funds be curtailed under any circumstance? In other words, should we restrict competition among funds? I would say to you that the answer to that question is no. I think we should allow fierce competition between funds because it is through competition that consumers can be offered better products and services and lower costs.

Another question that comes about is: is there a place for a very subjectively chosen process and also a secretly chosen monopoly within our superannuation system? This is a very important point. The way that the system works at the moment in relation to the selection of default funds for superannuation is that it is a very secretive process. There are no publicly available criteria showing how default funds are selected. There is no material made available about how the analysis has been conducted. There is no material made available about how a currently selected default fund would be deselected. As I travel throughout Australia and talk to stakeholders interested in superannuation, I often make this point: if I were on the board of trustees of a superannuation fund or if I were the CEO running a superannuation fund that was not a default selected fund, I would want to know what I had to do to make my fund qualify to be chosen as a default fund. But if I were a CEO or on the board of trustees that would be impossible because nobody would be able to tell me what I would need to do and what benchmarks I would need to reach in order for my fund to be selected as a default fund. It is a very secretive process.

The other key question that arises is: should the government foster apathy in any financial context? Again I would say that the answer is no. The proponents of the default selection process say it is important to have because Australians do not bother to select their superannuation funds and therefore we should have default funds so that people have a fund to go into. But I say that that apathy in a financial context, particularly amongst younger Australians, is a critical issue. Automatically selecting default funds and taking the need for any thought process away from people is actually only encouraging apathy. I would have thought the better approach would have been to require people to actively assess various superannuation funds and to provide people with information that would put them in a position to choose the superannuation fund that they would like to go into, rather than having the automatic selected default option, which, as I said, disengages people from the process even more.

I think the default arrangement is a retrospective step. There are no criteria available whatsoever. You only have to look at how the system has ended up being so ad hoc. For example, when you look at one particular award area you will see that there is only one default fund selected. That is in the retail sector. There is one default fund selected for millions and millions of people. But when you look at the awards in other sectors of a similar size to the retail sector you see that there are six, seven or more default funds selected. So under one award there is one exclusive monopoly selected but under other awards there are multiple funds selected. You have to ask yourself the question: how can that come about? How can only one fund be selected for one award but multiple funds be selected for other awards? This is what raises the concern about the process undermining choice and competition. It raises concern about the credibility of the process, because it is not a transparent process. No-one can find out why, in the example I have just given, one fund in particular has been chosen for one award, yet multiple funds have been chosen for other awards. No-one can make the criteria available.

If we are going to have this less than satisfactory approach, surely the process could be open, surely the process could be transparent and surely people could understand how these funds have been chosen? Fundamentally, I think it is a bad process. All of this is being done through the Australian Industrial Relations Commission. I find it interesting that last December the AIRC said that they did not think that they should be involved in this process. So the Industrial Relations Commission themselves have identified a degree of inappropriateness about them selecting default superannuation funds as part of the award modernisation process.

As the shadow minister for this area has foreshadowed, the coalition intend to move an amendment that would ensure that employers would be able to nominate any complying superannuation fund as the default fund, not just those that have been selected through the secretive process but those that have been selected through a process where employers would be able to nominate an alternative default fund. I think this would be a much better outcome. This would be an outcome which would foster choice and competition. It would be an outcome that would help engage people in this decision-making process. It would be an outcome that would lessen the degree of apathy that currently exists in this area. It is an outcome that would end in a better result for all Australians because choice and competition would be fostered. After all, that, in my view, is one of the key tenets of what we should all be doing to ensure that Australians are able to save for their retirement, to save for their future and at the end of the day to be able to have a high standard of living in their retirement.

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