Fallout from the Productivity Commission's superannuation findings

• Roundtable part 1: Fallout from the Productivity Commission's super findings
• Roundtable part 2: The trouble with default superannuation funds
• Roundtable part 3: Is enough superannuation reform never enough?
• Roundtable part 4: Has the excess contributions regime become excessive?
• Roundtable part 5: Superannuation lump sums – like it or lump it?

In this session from the 2012 Super Review ASFA roundtable, participants attempt to come to terms with the impact of the Productivity Commission's default superannuation funds finding on corporate funds and retail master trusts.

Mike Taylor, managing editor, Super Review: Ladies and gentlemen, welcome to the 2012 Super Review pre-ASFA roundtable and thank you for agreeing to participate at what is a particularly busy time of year.

We will be discussing a number of key issues today but I think we’ll start with an issue which I was discussing with Russell Mason a little earlier – the implications for corporate funds and retail master trusts flowing from the recent default funds decision.

Russell Mason, partner, Deloitte: There’s a huge question mark over corporate funds and corporate fund divisions, within the large master trust, as to what will happen to them if they’re not a full fund and therefore not able to receive, at least on a default basis, award contributions, when the changes go through [Parliament].

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Now they’ve gone through the lower house.

They’ve yet to go through the upper house, but I’m somewhat surprised that it went through so quickly and quietly in the lower house, and the Coalition doesn’t appear, at this stage, to have brought up any real concerns with it.

So, the corporate funds are now starting to lobby intensely. Whether they’ll be successful is another matter.

Mike Taylor, Super Review: Pauline?

Pauline Vamos, CEO, Association of Superannuation Funds of Australia (ASFA): There’s a bit of movement at the station, in terms of the Government’s approach.

A lot of corporate funds, putting aside the master trusts, are not in current awards, current awards are not enforced – and that’s why you’ve got a number of corporate funds that are the default, and quite legitimately, because they are for many members the best option.

The lobbying has been intense and the issues raised have been very real. I can say that I think, the minister’s office is listening, so I suspect we will get, at minimum, some grandfathering and possibly something a bit more.

What is going to be interesting is, if this legislation goes through as amended and if it is not changed or removed by the Coalition, it will change the whole landscape, because when you look across the 150 awards at the moment, some have one fund in there; others have 21.

So, as a minimum, what it will do is change the whole competition landscape and once that landscape is changed, it will indeed mean a very different industry.

Mike Taylor, Super Review: Anne, from your point of view?

Anne Myers, CIO, ING Direct: Well, we’re at the moment pure retail, and don’t do corporate funds.

So we’re watching the debate closely though, because obviously it plays into competition and where we might go in the future, and certainly we were rather surprised by the Productivity Commission findings and the result of that work.

Mike Taylor, Super Review: Peter, from an insurance point of view?

Peter Smith, head of distribution, Metlife: It’s interesting, because from an insurance perspective, corporates have been driven into superannuation – to get their life insurance, specifically. So, changing the landscape again is going to make it very difficult for the HR manager to understand, I think.

They’re already struggling to understand that they can’t own and pay for life and TPD really without that superannuation mechanism. So, if we’re now going to say, “You’ve got to go to these funds,” I think it will be quite confusing for the HR managers. 

Mike Taylor, Super Review: [Peter Beck], as the administrator amongst us?

Peter Beck, CEO, Pillar: Okay, look I don’t have any special wisdom for this seminar.

I don’t come in from an admin point of view, other than to say that, the biggest problem for administration is that governments change their mind and governments change, and we end up having to make the changes as a result of change in governments.

So I’m not sure that the rules that they’ve come out with are sustainable through a change of government, which means it will change again. I don’t think that’s good for the industry and it costs money every time you make changes.

I know we’ve had long debates about this and it is a difficult issue, very hard.

All I can relate to is, when I was a kid, I was the youngest of the three boys and we had these conflicts we had to deal with and we had a system, which is you cut and I choose.

This was for cake or chocolate or something – but amazingly, when you have a conflict and someone has to do the cutting and someone else has to do the choosing, you get a very precise cut.

I guess I’m just using that analogy to say I think we’re always going to have tension between employers and employees, and we need find a middle ground that both forms of government can be comfortable with.

Because, otherwise, we’re just going to flip-flop [with the] balance of power from one side to the other – and I don’t think that the current arrangements have solved that problem.