Industrial parties should select default funds: LGsuper

LGsuper has criticised the Productivity Commission draft report into default funds in modern awards for dismissing the success of the current system "too easily".

In a submission to the Productivity Commission, LGsuper pointed out that the existing system has "generally led to the listing of funds that have delivered above average returns for members" – something the Commission acknowledged in its report.

LGsuper also expressed concerns that an expert panel selected to make decisions about default fund selection would "not be closely aligned to workers' interests" and would be subject to potential conflicts of interest.

Members of the expert panel would need to be "experienced industry practitioners" in order to make decisions about fees, governance, insurance and advice, the submission said. Subsequently, they would bring with them "their own preferences and ideologies".

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"Industrial parties, employer and worker representatives are closest to the workers and thus most closely tied to ensuring members' best interests are met," the submission said.

LGsuper also objected to the "potential bureaucratisation of the process".

"Employers and superannuation funds are already burdened by enough regulatory costs. They do not need an added layer for little perceived benefit over what is now being achieved," the submission said.

The submission also took issue with the Productivity Commission's findings that the current system lacked contestability.

"The existing superannuation fund environment already has adequate competition built in to it through the choice provisions under the Superannuation Guarantee and the portability provisions in the Superannuation Industry (Supervision) legislation," the submission said.

LGsuper agreed that default funds in modern awards should meet the criteria used by the Australian Prudential Regulatory Authority in authorising MySuper products.