Following intense pressure by the Financial Services Council (FSC), the president of the Fair Work Commission (FWC) has appointed himself as a superannuation expert panel member.
President Iain Ross released a statement just before the Easter break confirming that he will be the latest member of the highly criticised expert panel for the purposes of the review of the default fund terms of modern awards.
The move aims to put “beyond doubt” that the quorum requirement for the expert panel in the Fair Work Act is met, he said.
“In my view this resolves any uncertainty that the expert panel is properly constituted.”
Ross’ statement follows continuous assertions by the FSC that the expert panel should be disbanded, especially after the removal of two of its members almost two months ago.
At the time the FSC raised major concerns about perceived conflicts of interest held by panel members.
President Ross was subsequently forced to announce that he had dismissed Vicki Allen and Stephen Gibbs due to the conflict, and appointed economist Tim Harcourt to take their place.
But not to be swayed, FSC CEO John Brogden again wrote to Ross urging him to cease the new panel because he believed it had not been properly reconstituted.
Brogden asserted this was because the panel did not include the president, and the president has only appointed one member to take the place of the two that were removed.
“Further, we believe that the remaining FWC expert panel members either do not have the requisite knowledge and experience, or have a clear conflict of interest,” Brogden wrote. “Accordingly we do not believe that it is possible for the expert panel to be reconstituted at this time.”
But Ross was not moved.
“I do not consider it appropriate to engage in further ex parte discussions in relation to the proceeding,” he replied.
In response, the FSC took matters a step further and wrote to senior deputy president Jennifer Acton requesting that the expert panel convene to hear submissions from all parties as to its proper constitution.
This was followed by a letter to president Ross written by the Association of Superannuation Funds Australia (ASFA) urging him to clarify publicly why he considers the expert panel to be properly constituted.
And then on April 17 came the clincher – Australian law firm Ashurst wrote to senior deputy president Acton on behalf of the FSC advising that they would be seeking permission under the Fair Work Act 2009 to be legally represented in the proceedings.
“Given that applications in this matter are due to be filed by Monday 28 April 2013, we look forward to hearing from the commission regarding the resolution of this matter at the earliest opportunity,” it stated.
And then suddenly on the same day came Ross’ announcement of his self-appointment, which was released in a statement on the FWC website at around 6pm on the eve of the Easter break.
The FSC told Wealth Professional
that it is currently considering its options.
Apart from the actual constitution of the expert panel, many other interested parties continue to battle about whether or not having such a default fund quality filter is useful, with many suggesting it should be removed.
A 2012 Productivity Commission report concluded that the default superannuation process was anticompetitive.
But Industry Super Australia (ISA) has just released a statement urging the government to ignore “the banks’” proposal to remove the filter.
“The major banks oppose a quality filer, instead preferring a free-for-all where they can approach their business banking clients and encourage them to select the bank super fund as the default for their employees. This is clearly fraught with potential conflicts of interest,” said CEO David Whiteley. “Industry SuperFunds, of which over half the workforce is a member, support a quality filter that short-lists the best super funds from which employers can select the default funds for their employees.
The statement added that the latest SuperRatings’ fund crediting rate survey has found the median industry superannuation fund balanced option outperformed the median retail fund balanced option over 1, 3, 7 and 10 years.
But the Association of Financial Advisers (AFA) completely disagrees. 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 model proposed for FWA is excessively complex with an external panel doing the initial selection followed by formal review and approval at the full FWA commission level.”
The consequences of the current level are 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, Anderson said.
His sentiment is voiced by Douglas Latto, president of Corporate Super Specialist Alliance (CSSA).
He said that employers being told to ditch their old funds and choose from a selection of just 15 will mean that thousands will be forced to the markets, and it will put a huge strain on business.
The CSSA is also concerned that the Fair Work Commission is responsible for overseeing the quality filter, because it feels the commission doesn’t have the necessary experience.
“I don’t see how the Fair Work Commission can walk in after a few months. It’s like getting your handyman to do your electrical work,” Latto said.