Super industry slams “illiberal” consolidation proposal

Alex Burke,  Senior Writer,  No More Practice Education

According to Liberal Senator Andrew Bragg, even if the Government's Your Future, Your Super reforms represent a step in the right direction, there is still a lot more work to be done. 

Bragg's new policy paper, Super Guarantee Australia, argues that while YFYS will reduce the proliferation of multiple super accounts and hold trustees to higher performance standards, "there is no guarantee that workers will start in a good fund." To remedy this, Bragg's paper suggests the establishment of a default, Government-operated default fund, in line with the 1976 Hancock Review. 

"While poor performers will eventually be managed out of the system by performance testing," Bragg says, "a strong basis exists for a central, highly-performing product to be the initial fund." In Bragg's vision, this initial fund would be "entrusted to an independent board of trustees" with assets managed by the Future Fund Management Agency. 

This proposal is reminiscent of the comments made by former Treasurer Peter Costello in 2017, when he called for the nationalisation of Australia's default super system using the Future Fund. (Then-CEO of the Future Fund Management Agency, David Neal, rejected the idea.) 

Under Bragg's proposed system, the default fund would operate as "an initial provider of superannuation on an 'opt-out' basis," which would both address the problem of member disengagement and would subject its management to "competitive pressures in retaining members." 

Bragg adds that this system would require "only minimal legislative change". The two primary steps, in his estimation, would be the Future Fund's effective acquisition of the Commonwealth Superannuation Corporation and the establishment of a "new default fund structure" within the Future Fund, which would "entail a separate board" - he uses QIC as a potential analogue. 

"Groups which do not bear a conflict of interest," Bragg says, have expressed strong support for this idea. These include the Grattan Institute and Super Consumers Australia. 

According to the Association of Superannuation Funds of Australia (ASFA) CEO Martin Fahy, though, Bragg's policy proposal is facile, illiberal and "inconsistent with the recently announced House of Representatives inquiry into concentration and common ownership in the Australian share market and would exacerbate the very issues which are the apparent cause of concern for this Inquiry." 

In his statement, Fahy added: "The industry is still in the process of implementing the latest round of major reforms which were legislated only last month, so creating further confusion for Australians right now is perplexing, particularly given the strong performance of superannuation funds over the past year.”

Fahy also noted that OECD secretary-general Mathias Cormann opposes Bragg's proposal. 

"Putting the precious retirement savings of Australian workers into a nationalised entity," Fahy continued, "raises the spectre that down the road we could see the fund raided for pet projects and political interference in its investment decisions."

Bragg has invited feedback on his policy paper - you can read the whole thing here.


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