June 22 2018
Reserve Bank governor Philip Lowe would take charge of appointing independent experts to a panel that chooses the top performing superannuation funds in Australia to manage the savings of unengaged workers, in new proposals outlined by the Productivity Commission.
Karen Chester, deputy chairman of the Productivity Commission, used hearings yesterday to float the idea of a group of regulators who were “beyond reproach” to select the proposed expert panel that would nominate the 10 “best-in-show” super funds that savers were to choose from.
Ms Chester said this would be chaired by the RBA governor and assisted by the chairman of the Australian Competition & Consumer Commission and the Australian Taxation Office commissioner.
“We want the expert panel to be accountable to the government of the day,” Ms Chester said. “People who are above reproach (and) who have no fear or favour with the government of the day. The government of the day makes those appointments, but the process is transparent and highly scrutinised.”
The Productivity Commission’s landmark report into the $2.6 trillion super system produced a series of recommendations aimed at lifting performance in the default super market, including the key proposal of a “best-in-show” list of funds that would share in about $1 billion a year in savings of new entrants to the labour force.
For many smaller funds dependent on continued flow of new savers, accessing the best-in-show list could be a life or death ruling. Ms Chester has proposed that the expert panel select the 10 default funds based on criteria such as long-term returns, fees, investment strategy and governance, but several industry members have raised concerns about the politicisation of the appointees to the panel.
Jeremy Cooper, architect of the government’s 2009 review of super, told a hearing on Wednesday that the risks resided in “the expert panel itself” in an industry that is “pretty divided and highly politicised”.
PricewaterhouseCoopers partner Cathy Nance, a super expert who consults to trustees on mergers, said yesterday the RBA-chaired appointee body was a “really good model” and added that the selection criteria for funds must not favour lowest cost or short-term-focused behaviour.
Industry Super Australia public affairs director Matt Linden, who has campaigned on keeping the default selection panel housed in the Fair Work Commission, was concerned the heads of the RBA, the ACCC and the ATO were government appointees. But he didn’t immediately discount the idea.
“We continue to argue the appropriate location for a merit-based quality filter is the fair work commission, albeit with further improvement to ensure comprehensive coverage and improved transparency in decision-making,” Mr Linden said.
The Productivity Commission’s proposed panel, unlike the Bill Shorten-appointed Fair Work Commission default super expert panel that was abolished in 2014, would be at arm’s length from government, outside the FWC and subject to judicial review.
Australian Institute of Superannuation Trustees chief executive Eva Scheerlinck said what was “more important than who makes the decision is the selection criteria” used to choose the top funds.