Opening up the default regime

Can the default fund regime be opened up to all eligible MySuper funds or will such a change risk eroding the protections offered to members working in dangerous industries. This is part three of a Super Review roundtable.
Mike Taylor, managing editor, Super Review: One of the things that keeps coming up and is not going away and I notice the minister, the Assistant Treasurer, was in yet another forum where he's talking about fund governance and I guess he's also been talking about the default funds under modern awards.

And it seems like the government is heading towards if you're an APRA approved MySuper fund then you are eligible to be added to the roster as a default fund. Is it workable?  Paul, I know your bank a week ago issued a media release putting a fairly strong position.

PR: Yeah.  Look, we prepared a product and went to the effort of manufacturing it.  We think it connects with both employers and employees that we deal with and we're licensed.  Put simply, we don't understand why we'd need to do anything more than be licensed to participate in that market.  It's quite a rigorous licensing regime that we had to go through, others had to go through, and we think that's the extent of the licensing that should occur.

MT: Leeanne?

Leeanne Turner, CEO, MTAA Super: The issue really comes down to who's got to make the choice in the long run is going to be the employers.  There's got to be some sort of filter over these currently 116 products.  How is an employer going to choose one of those?  If it's alphabetical, are they just going to go the big "A" at the top?  Are they going to get to the "Z"s?

MT: I'm going for the Aardvark Fund.

LT: The Aardvark <laughter>.  I mean there's got to be some sort of filtering system.  The decision is still being left with an employer to put a default fund in place, so they've got to have some means of being able to make that choice.  

MT: Paul?

Paul Cahill, CEO, ClubPlus: I disagree entirely.  I think having done this for 24 years running industry funds where I've run one of the bluest blue collar funds on earth, the meatworkers fund, and then this [ClubPLus], one size does not fit all.  You try to apply because we've got a licence and a product that will fit, you're absolutely incorrect.

If you're trying to tell me a miner, a meatworker or a maritime person can walk straight into a product, you're absolutely wrong.  And the biggest component in that is the insurances that are designed around it to fit those people in their working environments; are custom designed to do a certain thing because of the industry they're in.  To say one size fits all does not work.  And you will see people worse off as a result of it.  That's the first point.  And worse off at their families as well.

The second point is employers do not want 116 people to choose from.  They don't want six to choose from.  They only want one fund.  "What have I got to do?"  You'll see employers say, "How do I get an enterprise agreement around super because I don't want to have to deal with all this?"  And I'm talking about both industries that I've run.  They just want to make it as simple as possible.  "How do I expedite getting that person on a fund which we're happy with and out the door?  We did not want all this stuff coming through our doors.  We're not capable of assessing if that fund from one to 116 is better than the other.  We just want to get it done."  And they don't want to have to make those choices.

The problem is you get people who walk in on day one who've never had a fund.  An 18 year old apprentice or club worker, take your pick.  They haven't got a clue about it.  The employer then has to make a value judgment, don't they?  So they want to know that the fund that they're offering meets the requirements.  If they have to choose from 116, they're not going to be real happy about that.  

MT: Andrew, a view?

AC: Not that much of a view really.  I think I agree with most things that are said.  I mean do we need to have greater advice within the selection piece for the employers?  I mean do we need to engage consultants and firms to provide that advice in terms of what products to select?  That's the only thing I would say.

LT: I don't think employers are going to be up for advice.  

PC: They would not, could not...

LT: They're there, they want to run a business.  Superannuation--pardon the French--is a pain in the arse for them.  

PC: Yes, it's a cost.

LT: It's a cost.  "Why have I got to do your job for you?"  I've heard that I don't know how many times.  "Why have we--"

PC: "I'm running an abattoir and I'm trying to put cows in a box.  What do I care about what super fund you go into?  My job is to get that cow in that box and in a freezer."  Super's just one of those...

LT: Make it simple.

PC: Yeah, exactly.

MT: Paul, I'll give you right of reply on that.  

Paul Rohan, head of Sandhurst Trustees: Look, I stand firmly on my position.  We've got a licensing regime.  It's in there for a reason, and it should create competition.  Notwithstanding the fact that there may be certain employers who may have a connection with their industry or employer association fund, but I think it's open.

LT: But we've had a licensing regime since 2005 or 6.

PC: No, actually since 1991 if you go back far enough.

LT: Yeah, it depends on how you want to talk about the licensing regime...

PR: Yeah.  I understand how that works, so we've just been through an upheaval recently.  And to give people disengaged with their superannuation a number of options and I understand...

PC: But they already have options because if you look at any award there's not one award that has one fund in it.  The minimum, I think, is five or six.  Our award has eight funds in it.  

PR: And members do have a choice beyond that, I understand.

PC: That's right.  They have actually the right to say, "I want to go to A, B and C."

PR:  I think maybe we can afford our employers a choice.  I know we're here for members.  If employers see something in another fund that they think benefits their members...

PC: But aren't you worried about some of the issues that have been brought through for the for-profit funds?  Like, if I look at all the issues in superannuation today, we talk about advice, we talk about all the stuff that's going on in Canberra.  All the issues we have in our industry today aren't driven by industry funds or the government funds or the corporate funds, so to let those guys loose in a very core component for people, don't you think that's exceptionally dangerous, considering all the issues we've got today as a result of those companies operating in that space?   

PR: That's a pretty provocative statement.  

PC: Well, I'm just saying you've yet to see an industry fund blow up; you've yet to see an industry fund get dragged in front of a senate committee because of mis-selling products or doing the wrong things; you've yet to see an industry fund...

PR: So you've seen advice practices be dragged before those commissions and that's reported.

PC: That's one of.  There's others that are attached to it.  I'm just saying there are issues around it and all of a sudden they want to go and play in that space, let us into there.  Let's be honest, how many years now, is it 25 - 27 years, it's been a really good success story for Australia.  Those workers that never had it before are now getting decent balances to retire on.  We haven't had any calamities.  We haven't had any car crashes.  We haven't had any funds go out backwards, mis-selling, any of those problems, because industry funds have looked after those members religiously. Isn't that a good thing to protect?

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