Ken Hayne has quietly ended one of the great feuds of the superannuation industry by recommending and gaining bipartisan support to create single default funds.
The Government has accepted the call and, while not singling it out, opposition Treasurer Chris Bowen has implicitly supported it by committing the Opposition to implementing all of Hayne’s recommendations.
The battle now will be how the recommendation is implemented.
The Productivity Commission recommended making your first default super account being the lifetime option until you choose another fund.
The industry fund preferred model is for your super to follow you, so, if you default into AustralianSuper and then become a builders labourer you would join CBUs but the AustralianSuper money would follow you.
Multiple default funds created when people changed jobs is one of the great money wasters of the present super system and Hayne says it should be replaced by creating your first default as the lifetime fund.
The Productivity Commission has said multiple defaults cost $1.5 billion a year.
The reality is the big industry funds are now ruling the market so they can stand on their own two feet.
AustralianSuper has more than $145bn under management and is the biggest in the market. The default system has created controversy because it linked superannuation to industry awards but the PC wants this broken by having a selection of funds which employees can choose from.
The retail funds used to also benefit because if a bank lent a company money it was expected to use its superannuation fund for its workers. That system also made no sense.
Hayne didn’t have to venture so far into superannuation but in doing so he has ensured that much of the PC’s recommendations are now being implemented with a couple of big ones, like the best-in-show model, yet to be decided.
Hayne has followed the Treasury model by also recommending that mortgage brokers sell to consumers and not be paid by the banks.
The PC figured that would rob the market of competition and Treasurer Frydenberg has agreed. Banning trailing commissions is however a step in the right direction.
By John Durie (John Durie is the paper's senior business commentator. He has been a business reporter for 35 years, starting his career in the Canberra Press Gallery in 1980. John worked for 13 years as Chanticleer Columnist for the AFR, four years as business columnist for the New York Post, and also worked in Paris. John won the 2013 News Business Journalist of the Year Award.)
The Australian Business Review
5 February 2019