Bill's Media Releases

Government supports evidence based and expert led process for default funds

The Gillard Government is proposing an evidence based and expert led process for selecting and assessing default superannuation funds in modern awards which will ultimately lead to more transparency and competition.

 Minister for Workplace Relations and Superannuation Bill Shorten said a submission by the Treasury and Department of Education, Employment and Workplace Relations (DEEWR) in response to the Productivity Commission draft report into default fund superannuation arrangements for modern awards will ensure default funds in modern awards meet the best interests of members.

 “We want default contributions to be put into the most secure and high performing funds possible so Australian workers can maximise their retirement savings.”

 “It’s the Gillard Government’s job to make sure there is a transparent and robust process for the selection and assessment of these funds.”

 The joint submission supports the Productivity Commission’s suggestion that the selection of default funds for inclusion in modern awards to be undertaken by an expert panel within Fair Work Australia (FWA).

 Thanks to universal superannuation, which has never been supported by the Coalition, Australians’ retirement savings currently total around $1.4 trillion.  The Gillard Government is delivering on its commitment to progressively increase compulsory superannuation contributions from 9 per cent to 12 per cent, commencing from 1 July 2013.

 Around 70 per cent of award reliant employees in Australia do not actively choose their superannuation fund. This means the selection of default superannuation funds for modern awards must be driven by the best interests of member employees.

 The submission by Treasury and DEEWR proposes funds seeking to be listed as default funds in modern awards should have the opportunity to put an Expression of Interest to the expert panel within FWA, which would assess the funds against legislated criteria proposed by the Productivity Commission.

 A Full Bench of FWA would then consider the expert panel’s report, hear the views of industrial parties and determine whether or not to vary the relevant awards.

 The submission proposes FWA as the most appropriate body to undertake the assessment and selection of default funds given their extensive experience in industrial matters, including setting the national minimum wage and the creation and maintenance of modern awards.

 The submission from Treasury and DEEWR does not support the Commission’s proposal that employers should be able to unilaterally select a fund which is not a default fund listed in the relevant modern award.

 The submission says that allowing employers to unilaterally opt-out of the superannuation provisions in modern awards “raises considerable risks to the integrity of the proposed default fund arrangements, the safety net and the Fair Work Act framework”.  The submission confirms employers have never had the option of unilaterally opting out of awards, absent agreement or approval.

 “This inquiry is an important opportunity to make the fundamental entitlement of superannuation for working Australians even more effective.  Superannuation provisions in modern awards form a significant part of the Government’s safety net for Australian workers. The proposal outlined in the submission builds the Gillard Government’s other super reforms such as MySuper and increasing compulsory contributions from 9 to 12 per cent.” 

 “In January this year the Government asked the Productivity Commission to examine the selection and assessment of funds selected for inclusion in modern awards. This complements our financial and superannuation governance reforms by ensuring that the fund selection process is transparent and in member’s best interests.” Mr Shorten said.

 The Productivity Commission released a draft report on 29 June 2012, with a number of parties making submissions in response.

 The Productivity Commission is due to present its final report to the Government in October 2012. The Government looks forward to the release of the final report and its recommendations.

 The joint submission from the Treasury and the Department of Education, Employment and Workplace Relations is available at:

 http://www.pc.gov.au/projects/inquiry/default-super/submissions

 

Mr Shorten’s Media Contact: Sam Casey 0421 697 660