Changes to Default Superannuation Funds

The Fair Work Amendment Act 2012 includes a provision for establishing a new process for determining which funds are to be included in modern awards as default superannuation funds, for those employees who have not chosen a fund.

The provision gives effect to the Government’s response to the Productivity Commission’s Report into Default Superannuation Funds in Modern Awards (Report No. 60), which was submitted to the Government on 5 October 2012.

The new process involves a four year review in two stages, commencing as soon as practicable after 1 January 2014. The first stage is for the Expert Panel of the Fair Work Commission (FWC) to make and publish a “Default Superannuation List”. Superannuation funds will be able to apply to the FWC to have their products included in the List. The FWC must consider a range of criteria in determining whether to include a MySuper product in the List, including the product’s longterm investment return target, risk profile, fees, governance practices, quality of advice and so on.

Only funds which offer a “generic” MySuper product are eligible to be included in the List. No allowance has been made for employers to contribute to a Corporate or Tailored MySuper product.

The second stage is for the Full Bench of the FWC to make sure each modern award specifies at least 2 and up to 10 of the funds from the Default Superannuation List as the default funds for that award. There is a limited discretion to include more than 10 funds.

Employers contributing to pre-2008 funds will be able to apply to the FWC for a “transitional authorisation” for certain funds.

Enterprise Agreement as a Solution?

Employers wishing to continue to contribute into Corporate or Tailored funds which won’t be on the list of default award funds, could consider negotiating an enterprise agreement which nominates the alternative fund, if this hasn’t already been done in an existing EBA. Due regard would have to be had for costs and risks associated with taking this approach.

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