A single “default” super account should be mandated for Aussie workers according to Commissioner Kenneth Hayne although his report to the Morrison government neglected to provide any detail on how such a default fund would be selected.
The establishment of the ‘one default fund’ was a key recommendation of the final Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry final report which further underlined the importance of having machinery or technology in place to ‘carry over’ or “staple” a person to a single default account as they move jobs.
This recommendation was first seen in the long-awaited final Productivity Commission report on its three-year inquiry into competition and efficiency in superannuation release last month.
On Monday afternoon Treasurer Josh Frydenberg said his government would ensure that new fund members entering the system would have one account for life.
In January, the PC outlined a controversial proposal to create an approved shortlist of the nation’s top ten super funds in a bid to make a one default policy attractive to taxpayers.
“Because some employees, especially those who are young and working part-time, do not make informed choices about their superannuation arrangements, default arrangements are essential,” Hayne noted.
The commissioner went on to say that he agreed with the PC that default superannuation accounts should only be created for new workers who do not already have a superannuation account.
“The proliferation of unnecessary default accounts is not in the interests of members. Inevitably, funds compete to be nominated as default funds.
“If the relevant default fund is not fixed by some industrial instrument, competition between funds will focus on securing nomination of the fund by employers.”
In summary, Hayne pointed to evidence given in the Commission which showed that some large funds spend not “insignificant amounts” to maintain or establish “good relationships” with those who will be responsible for nominating the default fund for their employees.