Consolidation of superannuation funds would help limit the choice of default funds for employers, the Financial Services Council (FSC) said during a Productivity Commission public hearing this week.
The shrinking number of funds eligible for MySuper status will make it unnecessary to have another filter for reducing the range of default options an employer has to choose from under the modern awards system, as is currently the case with the involvement of Fair Work Australia (FWA).
The Productivity Commission's draft report, released in June, included four options for improving the current default fund selection process.
The commission has indicated it prefers option three and four, under which FWA becomes either the full decision-maker with the assistance of an expert panel, or where FWA accepts decisions taken by a new independent body.
Asked why the FSC did not support the commission's preferred options, FSC chief executive John Brogden said those options were based on the wrong assumptions.
"It assumes there is a massive choice of funds, but the industry is seeing significant consolidation, especially on the industry fund side," Brogden said at the Productivity Commission inquiry into default super funds.
"We are not talking about thousands of funds here."
He also questioned whether it was appropriate for FWA or a separate panel to provide such specific advice.
"We are just not comfortable with another body essentially providing a form of financial advice, because that is what choosing a default fund is. We just think that is not appropriate."
Instead, the FSC is supportive of option one, which would allow employers to choose from any licensed MySuper fund.
The reduced number of super funds combined with the performance data the Australian Prudential Regulation Authority would publish on MySuper options should enable employers to make an informed choice, Brogden said.
In a prepared speech, he said option one would make it unnecessary for any industrial party to be involved in the super industry.
"Although not the preferred option for the commission in its draft report, [option one] would remove bureaucracy and cost from the industrial and superannuation systems," he said.
"It would also formally remove the need for industrial parties to be part of the superannuation system, such as employer groups and unions."
But a representative for Unions NSW said employers needed assistance in selecting the right fund for a particular industry.
"The genesis of industry funds was: what is the best fund for our industry?" Unions NSW secretary Mark Lennon said at the hearing.
"We think it should not be a commercial issue, but an industrial issue."
