Dr Carol Royal

Superannuation is an industrial relations issue, and it should not be separated from wage negotiations. 

Many people regard what is paid into super as being deferred remuneration, and so they – not unreasonably – want to use this as a negotiation tool within Industrial Relations.

The federal government has announced that the Productivity Commission will begin a review next month of default super funds in awards. The Financial Services Council would like to separate IR negotiations and discussion of employee’s super. It says it is a financial services issue, rather than how it is viewed at present; as an industrial one.

Superannuation has become ever more complex and it is important not to confuse employment matters with the provision of financial products. The overall remuneration package has many elements, and superannuation is a very specialised area within it. While it is still part of IR negotiations, its complexity requires financial information and advisory support systems  so that parties to the negotiation process have the knowledge and expertise to facilitate outcomes that are sustainable and are geared to managing risk as best as can be during periods of change and volatility.

Separately, the Financial Services Council argues that unions and employer groups should not be restricted to selecting only the default funds that are specified in an award.

I agree that unions and employer groups which select the default superannuation option need to scrutinise the funds in which they invest much more closely. It is far too restrictive to just select the default option. Employer and employee organisations that are party to awards really need to dig down into how well a fund is performing, and ask many more in-depth questions of super funds, to ensure they are acting in the best interests of members.

The understanding of investment strategies and asset allocation by most people in the workforce, along with expectations about what super can deliver over the long term, goes back to its historical roots when the concept of mandatory super was introduced some 25 years ago, and many people misunderstand the nature of risk with super. 

Workers need to be strategic in the superannuation process, and that requires an understanding that strategies for deferred remuneration are much more complicated than just designing strategies for smooth sailing environments. Super needs to be designed with all weather conditions in mind.

However, while unions and employer groups must ask more questions about the appropriateness of funds’ asset allocation strategies and what might happen to returns, they might not understand the answer. Hence, the parties need to be given better advice when selecting funds.

Dr Carol Royal is the Director of the Masters of Technology and Innovation Management program.