The Workplace Super Specialist Australia (WSSA) is calling for existing employer funds to be included on the list of recommended funds for default superannuation.
The call comes in response to the Productivity Commission’s recommendation for an Employee Assisted Model for default superannuation, which would include a list of top ten best performing superannuation products, selected by an expert panel.
Speaking at the WSSA’s national conference in Sydney on Friday, WSSA CEO Douglas Latto said, “We believe that if the recommendation for the Employee Assisted Model goes ahead, any existing employer fund currently acting as a default fund should be included as an eleventh option.”
In practice, Mr Latto said this would mean that when an employee starts with a company, they would receive information on 11 funds – the ten recommended by the expert panel, plus the fund currently offered as the employer’s default fund.
“We propose that the employer fund becomes the default if the employee doesn’t choose, because employer funds are not just off-the-rack funds. A lot of these funds have highly negotiated fees, special insurance arrangements and specialised education facilities.”
Mr Latto said Workplace Specialist Advisers who work with employers have arranged significant benefits for employer funds, including:
• Reductions in fees due to scale
• Subsidised fees and insurance premiums
• Negotiated reductions in insurance premiums
• Inclusion of higher automatic acceptance levels for insurance
• Delivering financial education to the workplace
Mr Latto said that limiting the number of funds on the recommended list to ten would see many good funds struggle to survive.
“Ultimately, we believe the model as proposed would stifle innovation, create barriers for new entrants and many funds would disappear,” he said. “While funds might do all kinds of things to get on the list in the first instance, once they are on they will play it safe because they don’t want to come off it. There would therefore be no incentive to innovate.”
Mr Latto said the advantages of including employer funds on the recommended list are:
- The employee does not lose the significant benefits outlined above
- The employer remains an employer of choice because they are providing something extra to their employees which they can’t under the proposed model
- Funds outside the top ten can survive because they have a method of being an eleventh option
- All funds will be encouraged to innovate in order to remain in the top ten, so pressure will be on the top 10 to perform