ISA wants to leverage performance test to exclude default funds
Industry Super Australia wants funds which fail the superannuation performance test to be excluded from being listed as default funds within industry awards.
The industry superannuation funds group wants the Fair Work Act amended so that any fund that fails the superannuation performance test twice can no longer be deemed to be a default fund under modern award.
Just as importantly the ISA is arguing that where a fund is deemed to no longer comply it should not only be precluded from recruiting new members but that employer contributions to the fund should not be regarded as complying with the superannuation guarantee requirements.
The ISA has told a Department of Employment and Workplace Relations review that while the annual performance test overseen by the Australian Prudential Regulation Authority (APRA) has obviated the need for the Fair Work Commission to develop a default fund list, it can be used to remove funds.
Further, it said that the superannuation legislation should change to require APRA to inform the Fair Work Commission when a superannuation fund has failed its benchmarking test.
“There are currently a number of superannuation funds named within modern awards that have repeatedly failed to meet their own investment targets and consequently APRA’s benchmarking test and are no longer eligible to take on new members. It is entirely inappropriate that the term of a default fund names any fund that is ineligible to take on new members,” the ISA submission said.
It said that Section 159A of the Fair Work Act should be amended to add to the circumstances under which the Fair Work Commission could make a determination to vary the term of a default fund in a modern award to include circumstances where a fund has failed APRA’s performance test.
“It is important to note that the APRA performance benchmark is an annual process. The failure of a superannuation product to meet the benchmark in two successive years results in a series of consequences, including an employer not meeting their superannuation guarantee obligations should they pay into a fund that is no longer a complying fund following successive failures to pass the APRA benchmark.”
“Where a fund is named as a default fund and the fund is no longer a complying fund, the employer is no longer obliged to pay superannuation contributions into that fund. The naming of a fund and the inability of an employer to pay into the fund can result in confusion and industrial uncertainty,” the ISA submission said.
“It should also be recognised that the frequency of superannuation fund mergers has continued at pace. The ability of the industrial parties to make application to vary the terms of superannuation clauses to account for changed circumstances, including changes in complying fund status and mergers should not be unduly limited. The ability of the Commission to make a determination on its own initiative or on application under s159A of the FWA to vary the default fund terms within a modern award does not diminish the utility of a regularly scheduled review of superannuation clauses.”
The minute the union funds properly revalue their unlisted assets, in particular their direct property holdings, they can have a say in the performance test and default funds. It is a bit rich to be bashing funds for falling the performance test when everyone knows they are gaming the system, while the government and regulator sit on their hands.
what they are doing with unlisted assets is turning their super funds into hybrid ponzi schemes
You have to admit though, that if an Industry fund can’t have their unlisted assets valued at a level which enables them to beat the benchmark, then they really don’t deserve to be a default fund, do they? 😛
Along with the intrafund “advice” racket, the real issue at work here is reducing competition, and we end up with one big Union Super Fund. This is totally corrupt.