Unions to resist key royal commission finding on super
Advertisement

Unions to resist key royal commission finding on super

The union movement will resist a key finding of the banking royal commission, baulking at Commissioner Kenneth Hayne's recommendation that workers should be defaulted only once into a superannuation fund in their lives. 

The resistance is set to heap pressure on Labor to formally declare its hand on the recommendation months out from a federal election in which it will rely heavily on unions and union-backed industry super funds for support.

Unions will lobby for an "auto-rollover" model, which would see workers' funds transferred from super fund to super fund when they changed jobs.

Unions will lobby for an "auto-rollover" model, which would see workers' funds transferred from super fund to super fund when they changed jobs.Credit:Jessica Shapiro

The tension comes as the Morrison government tries to put its superannuation legislation first drafted in 2017 to a final vote in the last sitting weeks before the April budget.

The government is banking on Labor's support for changes that would see inactive so-called zombie accounts swept up by the Australian Taxation Office and insurance made opt-in for accounts with under $6000 and for those aged under 25.

Advertisement

It is also facing the prospect of losing a vote to Labor on extending sitting weeks of Parliament to deal with the banking royal commission.

Crossbencher Rebekha Sharkie is supportive of the proposal and independent MP Bob Katter has refused to rule out backing it. Andrew Wilkie and Adam Bandt said they will vote for the proposal.

Frontbencher Christopher Pyne said measures to deal with Commissioner Hayne's findings would not be put forward until after the election.

"It will take about 40 different pieces of legislation," he said.

Shadow treasurer Chris Bowen has repeatedly declared his in-principle support for the "default once" proposal, which would see a fund stay with a worker throughout their career.

It is understood Labor intends on following through with it, but has failed to publicly commit to implementing it.

Loading

Unions, however,  will lobby for an "auto-rollover" model, which would see workers' funds transferred from super fund to super fund when they changed jobs – an option criticised by the Productivity Commission for potentially allowing workers to continue to fall into dud funds, while increasing fees for members.

The Australian Council of Trade Unions maintains the approach is needed to ensure workers have sector-specific insurance and worker and employer representation.

It would also be likely to mean that many union-backed industry fund board members kept their pay packets, which are transferred back to the union movement.

An ACTU spokesman said it agreed with Commissioner Hayne that there should be a mechanism to ensure no one became a member of more than one default fund at a time.

“The development of such a mechanism should be done carefully and in conjunction with the operation of the default panel of the Fair Work Commission so people can be in the best-performing fund for their current workplace and circumstances," he said.

The revival of a Fair Work panel to decide which super funds are chosen as default funds for workers is likely to be a key negotiating point for the unions.

The panel has been nullified since 2014 after bank-owned retail super lobby the Financial Services Council challenged its jurisdiction and won.

“The Morrison government should restore this panel so the work of default determination can proceed," the spokesman said.

The unions may be prepared to give some ground to achieve this, but will insist on the best-performing fund for employees' "current workplace and circumstances" – the auto-rollover approach.

Both the royal commission and the Productivity Commission favoured the "default once" proposal because it would eliminated the proliferation of costly accounts and insurance policies and save members $150 million a year in the $2.8 trillion sector.

The Productivity Commission found that "default once" combined with an "elevated outcomes test" to lop off the tail of underperforming funds, could deliver new workers as much as $188,000 extra by the time they retire.

The commission found industry funds outperformed retail funds on the whole but there were still some such funds that were costing members.

The ACTU has backed Commissioner Hayne's calls to ban funds from wining and dining employers to get them to sign their employees up to their products by default. 

“We also agree with the commissioner that no fund should offer inducements to employers to obtain or retain default status," the spokesman said.

Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age.

Most Viewed in Politics

Loading
Advertisement