An abandoned push for the Future Fund to manage the nation’s $3.1 trillion in retirement savings has been given a second wind, following a proposal by Liberal senator Andrew Bragg for the sovereign wealth fund to become the default super provider for Australians.
In a discussion paper launched on Thursday, NSW Liberal senator Andrew Bragg calls for the Future Fund to become the default super fund for the nation’s workers, in what would amount to the biggest reform to Australia’s system of compulsory retirement savings since its inception.
Senator Bragg told The Australian Financial Review that giving the Future Fund control of the default system would force super funds to compete for members and be accountable for their performance.
Funds would need to actively convince workers to opt out of the government-run option, fundamentally changing the business model of what Senator Bragg describes as Australia’s “most privileged industry”.
“Paul Keating’s Labor government should have established a government-run super option when it created the superannuation system in 1992,” the senator said.
“The idea of the government having a benchmark in the market when it’s mandating a compulsory product isn’t particularly revolutionary.”
Under Senator Bragg’s proposal, new entrants to the workforce would be entered by default into the government-run fund, called Super Guarantee Australia (SGA), unless they opted to join a specific retail or industry fund.
Workers in underperforming superannuation funds would also have their retirement savings transferred into SGA.
SGA’s initial funds under management would come from the Commonwealth Superannuation Corporation (CSC), which manages $224 billion in assets on behalf of the nation’s public servants.
Folding the CSC into the SGA would address criticisms that the Future Fund was ill-equipped to manage superannuation savings because it lacked experience dealing with people, Senator Bragg said.
“People have a good view of the Future Fund, and I think people would like to join it. The only reason they can’t join it is because of Paul Keating’s original design,” he said.
Senator Bragg predicts about half of the nation’s 179 super funds could be forced to fold as a result of the change.
“High-performing funds will be fine – I think they will prosper. They are just going to have to work harder,” he added.
Not a new idea
Giving the $179 billion Future Fund stewardship of the nation’s retirement savings is not a new proposal.
The idea was most recently considered by the Morrison government in 2019, enjoying the strong backing of the then minister for financial services Kelly O’Dwyer.
The policy has been promoted by Future Fund chairman and former Liberal federal treasurer Peter Costello, who is also chairman of Nine, owner of the Financial Review.
But the proposal never made it through cabinet, in part due to strong opposition from then finance minister Mathias Cormann, who said the idea was akin to “nationalising super”.
Senator Bragg expects a lot of interest in a government-run option from his colleagues, describing his fellow Liberal Party MPs as “sceptical” about superannuation.
“I think there’s a lot of suspicion about the current system. I think people are disappointed with the retail funds. I think people are angry with the industry super funds. They all seem to be feathering their own nests,” he said.
The superannuation industry, unions and the Labor Party would vigorously oppose a government default fund taking away money that currently flows into retail and industry funds.
Michael Read is a reporter in the Sydney newsroom. He was previously an economist at the Reserve Bank of Australia and at UBS. Connect with Michael on Twitter. Email Michael at firstname.lastname@example.org