The Productivity Commission has found room for improvement in the country’s default superannuation fund arrangements in modern awards, with a draft report saying more should be done to promote the best interest of members.

 

The Default Superannuation Funds in Modern Awards draft report found more should be done to increase transparency in such organisations.

 

“Australian employees would benefit from a default superannuation fund selection process that is contestable, transparent and provides for the regular reassessment of the most appropriate funds to be listed in awards,” Commission Deputy Chairman Mike Woods said.

 

The Commission’s major preliminary finding is that there is no case of using prescriptive criteria for selecting and reassessing default superannuation funds. The Commission also found that the two most important factors in considering super arrangements is the need to properly assess the appropriateness of each MySuper product’s investment return and risk profile, and each fund’s expected ability to deliver on that objective.

 

Other factors investigated in the draft report include the appropriateness of the fees charged by the MySuper product, the mechanisms put in place by fund trustees to deal with conflicts of interest and the likelihood of members being switched to higher cost divisions of a fund (‘flipping’).

 

While the Commission noted the differences in costs in management of separate super funds, it urged more should be done to increase the administrative efficiency of the fund to minimise follow on costs to members. The Commission also noted that employers should be able to choose a fund that is not listed as an award, provided they can demonstrate that their employees are no worse off than if the employer chose an award based product.

 

Written responses to the draft report are required by Friday 3 August 2012.

 

More information is here.