Super choice on the agenda

THE Federal Government has started cranking up its campaign to give workers the right to select their own superannuation fund.

Choice of superannuation fund will be the biggest change to the superannuation system since the introduction of compulsory super in the 1980s, according to Assistant Treasurer Helen Coonan.

Before this change can happen, the Government has to get its legislation passed by a hostile Senate, which has blocked previous attempts to introduce choice of fund.

If the Federal legislation is passed, then all workers in WA will have the right to choose their super fund.

Workers covered by State industrial awards have had choice of fund since 1998, under State legislation.

The Commonwealth move will extend that right to workers covered by Federal awards and workplace agreements.

Presently, most workers have their super paid into a fund that is either selected by their employer or specified in their industrial award.

Senator Coonan outlined the Government’s case for choice of fund in a speech delivered last week.

“Not only will choice deliver control into the hands of those with the greatest stake in superannuation, the employees, but the additional competition in the system should lead to better services and lower fees from superannuation providers,” she said.

“Those arguing against choice are taking a view that the people whose savings are in question should not be entrusted with decisions about where to invest it.

“It is tantamount to saying that because buying a home is a complex and important transaction requiring education and understanding, we should take the choice away from individuals and let employers choose.

“I know it sounds ridiculous. We don’t let employers choose our homes. So why continue with a system where people have little say in how one of their largest assets is invested?”

Critics of choice of fund often refer to the experience in the UK, where a similar policy led to ‘churning’, which involves investment advisers moving clients through a number of funds. This led to big losses for many workers.

Senator Coonan asserted that these critics fail to take into account the different regulatory environment in Australia.

Treasurer Peter Costello took the argument one step further, arguing that choice of fund would make super safer.

“Do you realise at the moment in Australia that many people who have had their money compulsorily put into a super fund which performs badly can’t get it out,” he said.

The Federal legislation has a planned start date of July 1 2004, and the Government has allocated $28.7 million for a four-year education campaign.

The Association of Superannuation Funds of Australia is seeking a number of changes to accompany choice of fund.

These include specifying minimum standards for default funds, including a basic level of insurance cover, balanced investment portfolios and improved disclosure.

It has also called for national uniformity across the States and the Commonwealth.

“ASFA also recommends that any reforms to introduce choice of fund be part of a coherent package to reduce the overall complexity of super,” it said in a statement.

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