Yesterday afternoon the Financial Services Council (FSC) lodged an application with the Federal Court of Australia to challenge the validity of the Fair Work Commission’s (FWC) expert panel responsible for selecting MySuper funds.
The FSC is also seeking an order to restrain the expert panel from continuing to deal with the review of MySuper default funds unless it is properly constituted in accordance with the Fair Work Act.
The hearing is set for 9 May.
This legal action follows a statement from FWC president Iain Ross on 28 April, which denied the FSC’s request for a hearing on the validity of the expert panel for default superannuation funds.
The FSC claims that panel was not legally reconstituted after the dismissal of two of its members two months ago due to conflicts of interest.
The conflicts of interest were initially brought to the attention of FWC president Iain Ross by the FSC.
Ross then replaced the two with only single member, leading to accusations that the new panel was not properly reconstituted.
In response to the new accusations, Ross appointed himself to the expert panel, stating, “In my view this resolves any uncertainty that the expert panel is properly constituted.”
But the FSC disagree, and in court they will argue that:
- The self-appointment of the FWC president to form part of the Expert Panel on 17 April was not authorised by the Fair Work Act;
- The Expert Panel is not constituted in accordance with the Fair Work Act; and
- The Expert Panel is not currently authorised to continue to deal with the Review of MySuperfunds.
Apart from the constitution of the panel, the FSC is not supportive of the FWC having any part of the default superannuation fund process, said CEO John Brogden.
“APRA is the regulator responsible for authorising all MySuper products. It has credibility and expertise and would be better suited for overseeing the selection process.”
The superannuation industry is paying $45million just to comply with the FWC default fund selection process “with no benefit whatsoever”, he said.
And many agree with him.
Association of Financial Advisers (AFA) feel that the current selection process is anti-competitive and favours industry funds.
AFA COO Phil Anderson told Wealth Professional
that any fund should be eligible as a default super fund for an employer.
“Having Fair Work Australia involved in the selection of funds is inefficient. If APRA has approved a fund as a MySuper fund then it should be good to be a default fund,” he said. “The consequences of retaining the current [FWC] model is that we are unlikely to see a genuine opening up of competition in the default super model, which at present is very much in favour of industry funds,” he said.
The Commonwealth Bank of Australia used its submission to the Financial System Inquiry to voice its disdain of the process.
“For trustees to now have to apply to another body for the right to compete to provide services to a large segment of the market is duplicative and inefficient whilst imposing unnecessary cost,” it stated.
But industry groups, like Industry Super Australia (ISA), have launched a campaign slamming the banks for “incessant lobbying” with a goal to undermine a merit-based process for selection of default funds.
“The banks preference for a 'free for all' where bank employed financial planners and business bankers sell compulsory super at workplaces will reduce the integrity of Australia's super system and ultimately consumer confidence,” said ISA CEO David Whiteley.