The commission's own research confirms that "industry funds have systematically outperformed" retail funds, and members in default funds selected by employers and unions under the current system have fared better than members making their own choices, said Zachary May, Melbourne-based director of policy with advocacy group Industry Super Australia.
The commission report showed 9.6 million member accounts — with combined assets of A$436 billion — in default funds that have topped their benchmark portfolio returns over the past decade, and only 1.6 million accounts with A$57 billion underperforming. The commission highlighted the problem of members with multiple default accounts — the result of job changes — as a crucial inefficiency to be addressed.
Those results suggest the industrial relations system has been a healthy counterweight to financial industry interests in the superannuation sector, Mr. May said.
Proposing radical changes for a system generating good outcomes reflects political considerations more than practical ones, he said.
And that more than 5-to-1 lead for outperforming accounts could have been even more lopsided if the role Australia's Fair Work Commission should be playing in weeding out underperforming funds wasn't being obstructed by the ruling party's refusal to make needed appointments to fill vacancies there, said Eva Scheerlinck, CEO of the Sydney-based Australian Institute of Superannuation Trustees.
Mr. May called getting the Fair Work Commission process restarted a top priority for Industry Super Australia.
If Labor is taking Australia's Liberals to task for obstructing the FWC's workings, Liberal Party heavyweights have taken the opportunity to respond in kind.
Josh Frydenberg, Australia's treasurer, in a statement following the Jan. 10 release of the Productivity Commission report called on the Labor Party to stop blocking amendments before Parliament endorsed by the commission, including ones which would introduce strengthened "outcomes tests" for "MySuper" default products.
The treasurer pledged a final response to the Productivity Commission report following the Feb. 4 release of the Royal Commission report but had yet to do so as of Feb. 15, leading some market veterans to conclude the controversial "best in show" recommendation is dead in the water.
Skye Buttenshaw, Mr. Frydenberg's spokeswoman, countered that the recommendation is still under consideration. The treasurer's official response to the Productivity Commission report will be released "in due course," she said.
Meanwhile, Sally Loane, the CEO of the Financial Services Council, a retail super fund advocacy group, responded to the commission's best in show proposal with a mix of praise and concern.
She welcomed "taking default superannuation out of the industrial relations system" and tying default funds to individual members rather than employers, making it easier for members to become more engaged. At the same time, she warned that a best-in-show list of 10 funds could lead to a "monolithic concentration."
At the end of the day, the commission said while the current default system is working "reasonably well," it remains an "unlucky lottery" for too many members.
The report called for steps to make the system work better "for all members," including heightened "outcome" tests for funds hoping to retain default option status and a mechanism which allows members to consolidate multiple default accounts.
The commission's "implied assumption … is that there cannot be any weak links or missteps for default funds," and their solution is an "assisted employee model" that will "nudge" or encourage members to make choices, Mr. May said.
The commission report noted that a member in a bottom-quartile fund would have an additional A$533,000 if he or she had been in a median top-quartile fund instead.