The federal government has backed the Productivity Commission's suggestion that the selection of default funds for the inclusion in modern awards should be undertaken by an expert panel within Fair Work Australia (FWA).
Treasury and the Department of Education, Employment and Workplace Relations (DEEWR) offered their support as part of a joint submission lodged with the Productivity Commission on 17 August.
"We want default contributions to be put into the most secure and high-performing funds possible so Australian workers can maximise their retirement savings," Financial Services and Superannuation Minister Bill Shorten said in a statement.
"It's the Gillard government's job to make sure there is a transparent and robust process for the selection and assessment of these funds."
As part of the joint submission, the parties proposed funds seeking to be listed as default funds in modern awards should have the opportunity to put an expression of interest to the expert panel within FWA, which would assess the funds against legislated criteria proposed by the Productivity Commission, Shorten said.
"A full bench of FWA would then consider the expert panel's report, hear the views of industrial parties and determine whether or not to vary the relevant awards," he said.
The submission also proposed FWA as the "most appropriate body" to undertake the assessment and selection of default funds.
However, while the parties stated FWA was the preferred body to have responsibility for the selection and ongoing assessment of super funds for listing as default funds in modern awards, FWA's role should not be confused with that of the Australian Prudential Regulation Authority (APRA).
"Whatever process is adopted by the commission, the respective roles of APRA and FWA must be kept separate and be clearly defined," the submission said.
"APRA must retain responsibility for regulatory oversight of the superannuation industry and for authorising funds to offer MySuper products (a prerequisite for any fund seeking listing as a default fund)."
It said FWA's role would be to assess funds against "relevant factors" and then make "'on-balance' judgments" about which super funds should be listed as default funds in modern awards.
"Careful consideration needs to be given to avoid duplicating APRA's role in granting powers and responsibilities to FWA," it said.
"APRA should have a role in providing information and advice to FWA, as APRA's expertise will help inform the development of FWA's assessment methodology.
"APRA will have an ongoing role in monitoring the performance of all MySuper products, including those of funds listed as defaults in modern awards, and this information will assist FWA in assessing such funds at regular, defined intervals."
It said information on changes to the status of listed funds, such as funds that had merged, undergone name changes or had their MySuper authorisation cancelled, must also be provided by APRA to FWA.
The submission from Treasury and DEEWR does not support the commission's proposal that employers should be able to unilaterally select a fund that is not a default fund listed in the relevant modern award.
"This inquiry is an important opportunity to make the fundamental entitlement of superannuation for working Australians even more effective," Shorten said.
"Superannuation provisions in modern awards form a significant part of the government's safety net for Australian workers. The proposal outlined in the submission builds the Gillard government's other super reforms, such as MySuper and increasing compulsory contributions from 9 to 12 per cent.
"In January this year the government asked the Productivity Commission to examine the selection and assessment of funds selected for inclusion in modern awards."
Meanwhile, opposition superannuation spokesman Mathias Cormann said Shorten was "trying to bully" the commission on the matter.
"Bill Shorten is trying to bully the Productivity Commission on its views on how best to ensure genuine transparency and competition in the superannuation default fund market by pre-empting its findings and final recommendations due in October with his announcement [yesterday]," Cormann said in a statement.
"Clearly guided by a desire to give his union friends the strongest possible competitive advantage, Bill Shorten waited as long as possible before getting the Productivity Commission review underway.
"The Minister's media release makes clear, for example, that the government will preserve the discredited and conflicted place of Fair Work Australia in selecting default funds.
"We know that the Productivity Commission's draft report would have scared Minister Shorten's union-dominated Industry Super Funds - the main beneficiary of the current system."
He added that "unlike the government", the coalition would "carefully consider the recommendations of the Productivity Commission and deliver genuine competition into the default fund market".
The Productivity Commission released a draft report on 29 June and is due to present its final report to the government in October.
