Superannuation facing further change

The Conference of Major Superannuation Funds was held amid challenges still impacting the group insurance sector and moves by the Government to impose significant policy shifts. A roundtable of leading supeannuation industry executives examined the issues.

Mike Taylor, Managing editor, Super Review: Good morning gentlemen and welcome to the traditional Super Review AIST roundtable sponsored by Comminsure, which explains why we have their people here and participating.

I thought we’d kick off today because it was something that was raised yesterday by Mr Gonski at the opening plenary about governance and fund governance and I thought that would be a good place to start because the government is clearly on a path that says it would like to see some change and the FSC model is very close to that which applies to publicly listed companies. So I thought we might kick off actually with you Brett because IFM investors is in that space where other companies would be listed on the stock exchange but you’re part of a group that is very much of the owned by members model. So I just wonder what your take is on that.

Brett Himbury, CEO, IFM Investors: On the whole question of..?

Mike Taylor, Managing editor, Super Review: On the whole question of governance and how boards or anything should be made up really.

Brett Himbury, CEO, IFM Investors: Nice uncontroversial start Mike, thanks.

I’m not normally used to playing a wing but my guys inside here have obviously quickly passed it out to the winger or the outside centre. We have the privilege, in our business at least, of participating at least as a fund manager in many super fund trustee board meetings. And I think one thing that strikes me certainly across the industry fund sector is that whatever the background of the people one thing that does bring these people together is there is just that common motivation. And in the not for profit industry fund sector you can just see that difference about them being just genuinely, regardless of their background regardless of who they’re representing, absolutely unequivocally focused on the member because they just don’t have any conflicting interest with no shareholders.

So they’re just there because it’s the members’ money and their job and their focus is through the entire board meeting “what do we do to optimise the returns for the members”, so that’s good.

Having said that the debate around the construct of boards is not going to go away, it is a reality, we’re a big system and there’s a lot of focus on the governance of the system and so there should be. My suspicion is that notwithstanding the fact that the industry fund sector can rightfully argue that they’ve outperformed and [their] boards have therefore done a good job, the pragmatists suggest that a third, a third, a third model is likely to come in and be accepted. Hopefully [the industry fund boards] will still maintain that unrelenting focus on the member but bring about a greater level of diversity.

Tom Garcia, CEO, AIST: We’ve put our position out there of up to a third, so our board and management worked a lot of time with that with as many members as we could and that was a mid-way point between third-third-third and no movement at all.

There’s certainly a lot of funds that don’t believe there needs to be any change and then there’s those boards that have already gone to that change of three-three-three which is MTAA for whatever reasons. So our position of up to a third came about because we thought that maintaining this notion of equal representation is important.

The way that employee and employer reps, however they get there, working together has worked for quite some time and I actually spoke to a couple of chairs yesterday that said “outside of the room we might have some mighty stoushes with the other bloke in the room but as soon as they cross the door they don’t worry about what they’re doing out there they’re worrying about what they’re doing for members”. And I think that’s the bit that is not getting out into the public dialogue.

The notion of getting up to a third just allows the boards the flexibility to say this is where we might need some extra skills, this is where we might need to bring some extra whatever in. And it’s up to how that board constructs because there needs to be flexibility in that board, there’s no set determined size [governing] what a board should be or how it should be constructed. So that’s our position.

Mike Taylor, Managing editor, Super Review: Peter Brook you have a board that’s more the traditional board what’s your view?

Peter Brook, CEO Pillar Administration: Not so much now that the government has changed the legislation for representation on boards. We’re a state-owned corporation and as of January, APRIL they’ve changed the law so that it’s no longer necessary for a state-owned corporation to have an employee representative. And that director departed our board in APRIL.

But the interesting thing is from my point of view whether or not the intent of the director, and I do accept what you say around focused on their member, is sufficient. The skills and the experience and the background and the reach of the director is equally important particularly as they grow in size. So I’m more interested in the mechanism for change for these people.

I ask the question whether or not as funds merge and as their reach extends perhaps a little bit beyond where their traditional bounds have been whether or not that equal employer-employee representation is still relevant now that they have a growing and different client set, membership.

Alex Hutchison, CEO EIS Super: The point in relation to members first is a very good point because I haven’t seen any evidence to say that anyone hasn’t put their members first in the experience I’ve had with the equal representation model. In saying that we recognise there is going to be change, I think a third-third-third is a good balance if you’re going to introduce that change if that’s where the government ends up.

But in relation to skills and competence, we do have a fit and proper test and all directors need to meet that fit and proper test under the APRA rules anyway. So I think [in respect of] the skills and diversity in boards those obligations are being met no matter what model, whether it’s the ASX-listed directors model, the third-third-third or in fact the equal representation model because you’ve got to meet those obligations and your fiduciary duty anyway.

Andrew Proebstl, CEO, LegalSuper: I think the discussion around changes to the way boards are made up in industry funds has become a bit heated, sometimes emotional passionate type discussion and I think when you have those sorts of discussions you can sometimes lose some of the objectivity around the underlying issue.

I think as an industry we always need to be prepared to take a fresh look at things and accept alternatives that may not necessarily neatly and automatically fall in our own thinking. So I think it is healthy for the industry to be having the discussion it’s having about the role of independent directors and I think it also needs to be remembered that already many boards have independents on them, so it’s not an entirely new phenomenon. And there are live examples of people in independent director roles who are doing very good jobs, who have very good skills and experience that are adding to the performance of those funds.

So it appears with where the government is going with this that it is inevitable and the only remaining question is whether it’s one third, one third, one third or in fact possibly majority independent if they choose to go to that end of the spectrum. So I think we probably could have had the discussion differently to how we have had it. And the thing that concerns me also around this is the amount of energy and time we’ve put into discussion of this issue and other issues have not had as much attention as they could have and that’s a bit of a risk for the funds themselves.

You could make that comment about all sorts of regulatory things that are going on at the moment as well and the real challenge for us is to rise above all that noise and actually focus on, with no disrespect to the law of course, getting all the really important stuff that needs to be done for members and watching the bottom line when it comes down to it.

Bruce Murphy, CEO, BNY Mellon (Australia): I picked up on a few things that David Gonski said, he made the comment that the two student members of his university board were the most valuable at the time and I think that’s a reflection of the value that member representatives can add. So I think it’s just a matter of the pendulum swinging so it’s not overweight. And potentially use of committees as well, if there is a perceived lack of investment expertise some committees can make that up and expertise can be applied there and more time can be applied to the investment debate. But I think you can’t dispense with that representation at the board level.

The Challenges facing Group Insurance

Mike Taylor, Managing editor, Super Review: Let’s move it along a little bit and the group insurance area has been pretty interesting from the point of view of all the insurers. They seem to have been pushing some serious premium rises on some funds and the texture of the industry has changed a lot from what it was two years ago. I’m going to start with Jeffrey Scott on this one because he is from Comminsure, after all. Do you think we’ve seen all the change we’re going to see and the pressure on premiums or is there more to come?

Jeffrey Scott, Executive Manager, Business and Growth, Comminsure: I honestly think there’s actually more to come. I think the main reason is that the life insurers in the market place have focused pretty much on competition and not on appropriate risk selection, so when they’re gone to the actual individual trustees and put their marketing plan in place they’ve sold some really tremendous benefits but they haven’t sold the equal risk selection process.

Currently with the high automatic acceptance levels that are sitting there for most members where a person can join the fund, have no underwriting and get automatic cover for death and TPD and sometimes income protection that potential risk needs to be passed along or caught some place. And what we’re finding now is that that inappropriate selection of risk that has occurred in the past three or four years is now catching up with everybody and is being passed on with higher premiums.

So I think that the insurance companies need to work with the trustees to make sure that the benefits that are being provided are cost effective benefits for members but we also manage the risks so we don’t pass on those significant premium increases that.

Mike Taylor, Managing editor, Super Review: Alex you’ve no doubt looked at your insurance and what’s happened with yours?

Alex Hutchison, CEO EIS Super: There’s no doubt like everyone else our premiums have increased, however I’m still a really big believer in the value of cover within the fund particularly for our members because a lot of them are in dangerous occupations. So still despite the increases it is still very good value for them of 1) that they’ll get the cover and 2) in that you’ve got that collective bargaining premium which, despite the rises, is still cheaper than what they’ll get if they try and purchase it themselves.

In fact, through the engagement with the fund they’re more likely to increase that cover as well. So we just accept that we’ve come out of a price war and I think the funds have obviously benefited from that for some time and now those premiums are unsustainable. I don’t think anybody likes it but that’s the way life is.

Mike Taylor, Managing editor, Super Review: Andrew, as another fund CEO what’s the feeling. It’s a very different member demographic I must say to Alex’s but what’s your feeling on it?

Andrew Proebstl, CEO, LegalSuper: I think that’s right and that’s actually one of the key factors for us really because we’re essentially a white collar professional occupational group and have always focused on the fact that because we have that more homogeneous membership we can be nimble in the way we negotiate the insurance arrangements we have for our members.

The last review we did of our insurance resulted in us securing a three-year premium freeze so unlike the increases that many other funds have, and particularly large funds with multi-occupational groups in them, we’ve got those premiums locked-in for a three-year period.

I think what that says, and is a topic I often make comments on, is really the value of having a smaller niche-focussed fund. I think if our members were sitting in Australian Super, at the risk of picking a fund randomly, they would not be in an environment where they were protected from the trends that are going through in terms of premiums at the moment. So we have that three-year premium freeze and if they were off in another fund, which has large increases, they’d clearly be experiencing large increases.

It’s one tangible way that I think the smaller funds can demonstrate they can be not only nimble and clever and innovative in what they do but they can also be very commercial and have success in negotiating. Being bigger is not necessarily better always and, in fact, being smaller sometimes can have its advantages and you just need to know what those advantages are and play to them constantly.

But with insurance I do agree with the earlier comment made but I think some of the funds were overly enthusiastic in having huge headline sums insured that they could go to the market with and then the chickens have come home to roost subsequently when the claim experience has deteriorated. If you’ve got multi-million dollar sum insured and you have only a couple of claims then it really does make quite a dent in your claim history and therefore future renewals. So happily for our members we’re in that territory at the moment.

Mike Taylor, Managing editor, Super Review: Peter Brook as an administrator, the administrator is often the gatekeeper on the relationship between the member, the fund and the insurer, what have you noted?

Peter Brook, CEO Pillar Administration: It seems to me that every time there’s a thought about changing insurance it’s the administrator that ends up with the bag to deal with. And we’re certainly finding that almost every change that comes down the line ends up with us taking on more work from the underwriters and the insurers.

We don’t have a problem with that provided there’s an appropriate return as an organisation and not a default [situation] that we will pick up the tab and pick up the work. Philosophically I think that as a country that’s chronically under-insured I think this is a fantastic way that we can partially address that. But I think that it is one of those things where a homogeneous approach across the board can’t continue. Fortunately I think that does mean more rule changes that will be reflected in the work that we do and will be beneficial for my business.

Do members really understand insurance?

Mike Taylor, Managing editor, Super Review: One of the things we noted in a survey we’ve been doing is how few members of funds probably understand the insurance they’ve got. In fact, the survey indicated that the perception of people attending conferences just like this one, CMSF, was that it could be as low as 10 to 20 percent of members actually understanding their insurance offering. Tom, do you think that there is still a big education piece there in terms of insurance?

Tom Garcia, CEO, AIST: I think there’s a big education piece full stop about super and what its purpose is in the Australian economy.

I think two of the key differentiators for funds going forward will be their insurance offering and advice and how that all knits together to explain to people what their insurance offering is. How it works, how they can adapt it, how they can change it, do they need to move it up, do they need to move it down, how does that actually work. It can be very confusing, TPD for instance can be a confusing thing.

I remember as a planner trying to work out which is the best one to work out, it’s not so simple sometimes sitting inside super, can you take it out. I know they’ve adjusted a lot of those rules but it was quite confusing for a little while. So if financial planners find it hard to work out which is the best one I don’t see how consumers are ever going to work it out. But I think insurance really has a place.

I think going to what Andrew said there are other funds out there where there’s no way those people would get insurance anywhere else. I remember I had an experience where I was actually doing some advice for a Cbus member and they were elderly and they had some debt and you thought well you need to have some insurance to protect this in case something happens with the debt. I remember looking at the premiums and I thought that’s quite high for this member. So I looked outside [the super fund] and realised its high because nobody else wanted to know them. They were working at a steel works, and it’s like you need to stay in Cbus because you will not get insurance anywhere else. And I think those sort of things are important to explain to members.

Jeffrey Scott, Executive Manager, Business and Growth, Comminsure: I think probably the most important thing when we’re looking at this is that the members are blissfully unaware of the insurance they have until a claim happens. And so I agree that education is paramount and the insurance companies should be driving this in conjunction with the trustees. I know that Comminsure and other companies have started this process.

Considering the knowledge of superannuation itself, it’s taken almost 20 years for members to be actively engaged in looking at the investment side of their portfolio, it may take hopefully not quite as long for them to be actively engaged in their insurance under the portfolio. Now, with that said, I think the one good thing is that come 1 July 2014 the government has legislated that all the definitions inside super effectively have to be very homogeneous so in comparing between funds death, TPD and income protection definitions are going to be very similar. So the only differentiator you’re going to be able to find will be the sums insured and the premiums. For grandfathered members they have a slightly different transition period but for any new members it becomes a very similar comparison between sums insured and premiums available.

Tom Garcia, CEO, AIST: Mike, I think the claims end of it is going to be well serviced anyway, there are enough ambulance-chasers, there are enough people when there’s money changing hands and claims to be made that you can sift through it. I think that it’s on the transfer of a fund and therefore the loss of cover, that’s where I think the education piece and the understanding of the cover is going to hurt most.

Are lawyers predatory?

Mike Taylor, Managing editor, Super Review: Actually because we’ve got Mr Proebstl here and the Superannuation Complaints Tribunal chairperson, Jocelyn Furlan will kill me for raising this because it was something she raised in her session yesterday. But what she was talking about was how quickly lawyers involved themselves in the process. And I’m just wondering whether that’s a healthy sign, do we have to accept our friends the lawyers or does the industry have to actually explain to its members that actually there is a process and you needn’t necessarily go to a lawyer until the very end?

Tom Garcia, CEO, AIST: I think that’s a key thing that as an industry we need to do, we’ve been speaking with ISA about this, we’ll speak to ASFA about this. I think as an entire industry we need to communicate out to people that there is a process and you can go to your fund or you can go to the SCT and get a resolution before you need to go out or you’re approached by an ambulance-chaser. There is a system that works and there needs to be better communication of that system I think.

Mike Taylor, Managing editor, Super Review: Alex, you’re a lawyer.

Alex Hutchison, CEO EIS Super: Absolutely. Just one thing in relation to the [group insurance] change, we were actually offered no increase only on the condition that we traded off some of the cover, some of the features of the cover. And some of those features I’d say were what we’d call key so we reluctantly accepted an increase in premiums because we weren’t prepared to trade off features of cover.

Because from a liability point of view you then would have the issue of people thinking they still had cover for certain things where just because you might have sent them a letter saying in 30 days your cover is changing we could be sued over not being in the best interest of members. So that is one method we’ve seen in relation to premiums.

[With respect to lawyer] you’re absolutely right. I think even five or six years ago you really didn’t see much legal involvement at all but now it is constant, just about most matters you’ll have some involvement of a legal practitioner. And really at the end of the day in most other avenues members, people or consumers who have a complaint are essentially told you’ve got to go through this external dispute resolution scheme first before you can actually go further. And if you have the same rules applying to insurance claims I think that would be a good thing because the truth is in most circumstances there’s absolutely no need for an external legal practitioner to play a role, it is just an impediment to the process generally.

Andrew Proebstl, CEO, LegalSuper: At the risk of sounding like I’m defending the constituents of my fund I think in our fund actually the use of lawyers to help applications for insurance claims is really low, like almost non-existent. Now we think that’s because people who work in the legal profession are familiar with paperwork and process and documentation and so maybe the claim application process for an insurance claim in the super fund is not possibly as intimidating as it may be for others in other occupational groups that don’t have familiarity with process and documentation, and that might be the case. So maybe I make a bit of a leap there.

I also then think that the issue comes back to the funds having to have responsibility for educating their members about the processes and the avenues they have to make applications. And I also don’t think we should criticise or seek to get in the way of a member choosing to get advice on any issue whatever it might be, legal or financial advice or whatever it be.

Some people merely feel that they need help and they want advice and they want advice from someone who’s not connected to the organisation that they’re currently working with. So I think it has to come back to the funds doing more in member education, telling members about the processes they need to go through and not feeling awkward or uncomfortable or that there’s something sinister going on if a member chooses to get any form of advice to help them through a financial decision. I think that’s just an entirely appropriate thing for someone to do if that’s what they want to do. I keep hearing all these horror stories about people being charged lots of money for writing a letter, which I can say¨

Tom Garcia, CEO, AIST: I guess that’s the balance isn’t it, we all want the members to get the right advice and to get the right outcome but you don’t want them to be preyed upon because they don’t understand the system. So there’s probably a lot of areas in superannuation where we can simplify the way people access advice and the way that they connect with the fund. Because yeah, a lot of people are daunted by paperwork because they’re either innumerate or illiterate and it’s just those figures are still strikingly high in Australia. And to fill out some huge form for an insurance claim would be daunting for some people.

Jeffrey Scott, Executive Manager, Business and Growth, Comminsure: I think on top of that though is when you go through a traumatic event of some description and whether it be you’re off work, you’re sick, you’re ill having to then go through the claims process.

A person is often suffering financially because they’re now out of work and they have to go through that claims process and it’s like okay how long is it going to take before I get my money. It needs to be communicated well to the client that this could take a matter of weeks or in some cases months before they get their money because we have tick all the boxes because as trustees and as insurance companies we want to make sure that we’re doing the right thing legally before we can release the money.

If that process is not communicated well to the client they then sit back and think well obviously they’re not interested in paying me this money, they’re just trying to drag this out. And what we’re actually trying to do is make sure we give them every single dollar that they’re entitled to. But if they’re unaware and they’re not communicated with throughout the process then that’s often when they’ll say okay I need more help because it looks like we’re not being engaged with either by the insurance company or my fund.

I think that entire process is when the client needs us most is at claim time. And instead of us distancing ourselves or going into our holes and saying we’ll talk to you in a few weeks’ time we have to engage them from day one. So once they come to us and say I think I have a potential claim and help them through the process. And also being conscious of the fact that if we have to say no to a client because they don’t meet the conditions under their income protection policy or don’t meet the conditions under their TPD policy then we tell them the reasons why and also tell them what circumstances they haven’t got to a level of disability required to get payment and in what circumstances they will and if they come back to us at a later date they may then qualify for that TPD policy in particular.

I think that’s importance of the communication process - instead of it being “us and them” it should be a “we” because ultimately that’s why we put the insurance in place to begin with was to help protect the members.

Alex Hutchison, CEO EIS Super: I think it’s the monopolisation of the contact. What we see now is that the first call back is not even an enquiry from the member and sometimes if there’s a catastrophic injury if the member or the family of that member contacted us and we ultimately helped the employee, their claim is often settled within a couple of days if it’s catastrophic.

State of the market

Mike Taylor, Managing editor, Super Review: One for the fund managers, the latest results from Super Ratings and Chant West shows everything is in very positive territory. But the experience of those I see following these things is that there’s an awful lot of funds out there talking the talk without necessarily walking the walk in terms of getting their money out of safe harbour investments and into some of the more exciting investment options. I’m just wondering Brett, what’s your perception on where the market is going and what’s driving the performance of the market?

Brett Himbury, CEO, IFM Investors: The last 12 months have been very good for members of super funds largely underpinned by the performance of equity markets both in this country and around the world. Looking forward the bottom line is the world’s got too much debt, the world has and will need to continue to have low interest rates.

You put a risk premium on with those risk free rates and you’re probably likely to get returns across property, infrastructure, listed equities, bonds that are well less than in recent history. From our perspective that’s the unfortunate reality and it comes down to a couple of simple principles; the world has got too much debt and we need to continue to sustain relatively speaking low risk free rates. And if anything we’ll probably see some of those risk free rates go up moderately so investors will probably see the potential of capital losses in bonds. Then you put a premium on that for equities and you’re probably going to get a return in the future that’s slightly less than the return certainly we’ve seen in the recent past.

We think that not just because of our particular perception and infrastructure but that superannuation remains an ideal investment to get access to the illiquidity premium that exists in unlisted assets like private equity, appreciate the model of private equity absolutely needs to be thrown out, two and 20 is dead, I think I’ve said that before. But I don’t think that private equity itself should be thrown out because it is a way in which superannuation funds can get access to superior long-term returns and given we’ve got a system that has a long-term nature we need to get access to those returns. The same for infrastructure, same probably for unlisted property, potentially other unlisted asset classes as well.

So in summary I think great recent results, the challenge for us all is to make sure that members’ expectations aren’t underpinned by those, to be frank, because looking forward the outlook is okay don’t get me wrong so I suppose I should clarify that. We still think that long-term returns should be quite solid but they won’t be of the order of magnitude we’ve seen in the last 12 to 18 months.

Bruce Murphy, CEO, BNY Mellon (Australia): Yeah agree with a lot of what Brett says, a lot of the good news has been priced in.

We still see reasonable returns coming through on equities and all that but as soon as we get bit of bad news at the moment the market drops a fair bit. So I just think it’s a little bit volatile with no big drawdowns and reasonable returns over the next year. Interesting the comments on unlisted definitely does tap the liquidity premium.

Brett you’re a lot closer to this than our particular business but what we’re seeing is that prices have been a bit up, the Australian funds are probably going to start to have to look offshore, complexity goes up you’re hedging other currency and all that. So I think there also is a case to be quite balanced in the way you approach real assets; they need to be there, they need to be there to check inflation. But listed markets do offer something, they offer something that’s more readily understood and more liquid and global REITS and listed infrastructure securities I think still have a fair bit to offer.

Brett Himbury, CEO, IFM Investors: Yeah and to Bruce’s point there’s a lot of capital that has been sitting in fixed interest markets around the world and that’s looking for a home and there are parts of many markets that are getting a bit up. But there are also pockets of pretty good opportunity but definitely we’d cite European regulated infrastructure assets as well and truly been a bit up. But having said that the US energy market infrastructure assets are fantastic opportunity as that energy revolution is underway over in that country for example.

Mike Taylor, Managing editor, Super Review: Andrew Proebstl you’ve no doubt got an investment committee and you’ll be at this stuff all the time, what is the mood sitting inside a fund looking at these opportunities?

Andrew Proebstl, CEO, LegalSuper: I think it does mirror what’s already been said, I think people are very comforted at now having had a longish period of much stronger returns given the GFC period and that sort of thing. But at the same time it’s tempered by an element of caution and recognition that things could change very quickly.

So it’s a bit of a mixed bag of feeling really I think. In our case about a year ago we changed asset consultant so it involved us going on a process of reviewing our investment beliefs and our strategy and our manager line up etc. So that’s been a really useful exercise to go through over this sort of period as well just to get comfort that we’re investing in the way we want to be to achieve what we want to achieve. And it makes you look at things you wouldn’t in the ordinary course of business question or review. So yeah it’s certainly a healthy process to go through.

Alex Hutchison, CEO EIS Super: Talking about balancing that risk equation. Really, at the end of the day, nobody is certain about the future although we all think we are so it’s always interesting especially when professionals have a common view. I just think things are going to be pretty tough.

I actually take the point that asset prices, in particular infrastructure asset,s while they’ve been a bit up and that’s what people or a lot of funds want more access to is something that’s got a natural inflation hedge. But we’re quite cautious at the moment because we’re just not certain. As Brett said the amount of structural debt in the world is still very high so you get these little shocks that are absolutely magnified because there is a fair bit of uncertainty there.

We’ve adjusted our risk profile to be more cautious. And at the same time we’re chasing I think the same assets everybody else wants, better than bonds that give you a natural inflation hedge. So we’re having a good look at how we go about doing that at the moment as well.

Dealing on default

Mike Taylor, Managing editor, Super Review: Last question because we need to get things wrapped up so that the conference can proceed. But default funds under modern awards, obviously quite a big issue for the government and an equally big issue for the industry funds. And I noticed Tom yesterday in your opening address you did mention in passing how it was impacting and how you felt it should be approached. What’s your concern with it, do you believe that the current regime will be sustained with the government that’s currently in power?

Tom Garcia, CEO, AIST: No I really don’t. I think something will change, I can’t see the status quo remaining it’s just a matter of the level of the scale that they move up and down from. Potentially moving it all the way out of the industrial system down to an opt out, which was a Productivity Commission recommendation early on in the first draft, it was then taken out.

We’re quite supportive of the current system that’s been through the Productivity Commission now. It was summarised last night by Nicholas Barr in this whole notion of choice, so there are 116 MySupers out there now so you could argue, I guess one side of the fence is saying if you’re a MySuper then you should have access. But if we then go to what Nicholas Barr was talking about with choice you’re then potentially loading an enormous amount of red tape onto every single employer in the country to then say which of these 116 are you going to choose.

That’s why we think there should be another level of filter over the top to say for your industry or for your award these eight, ten, 15, whatever the number is that that group decides, these are the best ones for you. So I guess that’s our position on it. We hope that it stays like that but we’ll just see what happens.

Mike Taylor, Managing editor, Super Review: Peter Brook do you have a view? I mean it’s an interesting one for an administrator because it probably in the end doesn’t matter a whole lot, you’ll just send the money wherever it needs to go.

Peter Brook, CEO Pillar Administration: I’m just wondering about the comment that you make that whether or not telling somebody that you must choose from this eight, ten, 15 funds versus the 116 funds whether that’s any easier decision. I guess it’s a smaller pool but I don’t think that necessarily takes it away.

We’ve had some interesting experiences, which really revolve around some conflicts of interest regarding potential board members, which roll up into this. And it seems to me that whilst they have very little to do with this that the processes of becoming a registered fund seem to add to the red tape piece that you’re talking about and I think that wherever we’re putting red tape on must make it much harder. And so my very distant view of is that it needs to be minimised. That’s about as close as I get to it.

Andrew Proebstl, CEO, LegalSuper: I think the processes around choice of default fund have been evolving for some time. We find with employers that whereas once in the past employers had a very paternalistic view of getting deeply involved in the choice of a fund for their staff superannuation, many employers are backing away from that.

They say “this is not our core business, we make no money out of it, we just want a default fund”. And so the employers, not all perhaps, but some employers are backing away and have more of a hands-off attitude than maybe they once had in the past.

The other issue I see around a default fund, which doesn’t get too much airplay but we all know it’s out there, is the default fund choice being influenced by commercial considerations for the employer. So an employer chooses a big bank as the default fund because they get discounted finance from that bank if the superannuation of the staff is put into their default fund product. And my view, and certainly my board’s view, is that the choice of the default fund by an employer should be solely governed by the best interest of members and have no regard to the commercial interest of the employer because it’s just not the employer’s money it’s the member’s money.

So if anything else is going to be done around the default fund issue I think that particular issue needs to be dealt with pretty definitively. I appreciate it’s not easy to nail it because sometimes it’s very opaque-like deals that happen but it is a very real issue, a very live issue and I think needs to have something done about it.

Mike Taylor, Managing editor, Super Review: Jeff, the insurers are always tied up in the whole MySuper thing and what’s chosen, any implications there?

Jeffrey Scott, Executive Manager, Business and Growth, Comminsure: From the insurance company’s point of view I think the answer is no. The insurance that we’re going to see across the industry is going to be fair consistent with the 1 July 2014 definitions.

MySuper provides that default cover it’s safe to assume in the modern award. And I think ultimately this was said by the other members of the panel - what ultimately people get, whether it’s inside a modern award or it’s through a MySuper account provider, then we want to ensure it’s in the best interest of the member.

Ultimately,whatever the insurance provisions are or the investment provisions are when the member decides to retire at whatever date they’ve got the most money in there so they can actually have comfortable retirement. And whether that’s through a default arrangement or whether that’s through a modern award or whether that’s through a MySuper arrangement and as long as it’s in the best interests and the member is looked after I don’t think anybody really cares.

I think that ultimately whatever choice the government makes we need to ensure that the members’ interests from an insurance perspective and more importantly from an investment perspective is maintained. And I think the other thing is the potential competing responsibilities of an employer to get good deals elsewhere should never be a consideration if we’re looking at members first.

Alex Hutchison, CEO EIS Super: I think it’s interesting to note that up until 1996 employers actually had an exemption under the law that they could actually recommend a superannuation fund for their employees outside of the licensing regime.

That was changed when FSR came in. So it just goes to show how far things have moved to be a very hands off approach, which I think is the appropriate approach. Now the truth is everyone around this table, whether it is a commercial or industry fund, everybody competes with everybody else. Members do choose otherwise you wouldn’t have seen the massive growth in SMSF. I think the process with the Fair Work Commission has crept up on us all, taken us all a bit by surprise, we all assumed that process wouldn’t have happened with the change of government. So I accept that we’re all going to compete with each other and it will be what it will be, kind of like what Tom said.