"This government, and frankly this minister, in particular, have chosen to engage in an ideological war against one part of superannuation – industry funds, which they call union funds, which of course is not accurate."

The trade union movement was quick to dig in against some of the recommendations, which would have the effect of removing super from the industrial relations system altogether, calling them "badly misguided".

"The link between employers, unions, workers and their funds has been a key reason why industry super funds have systemically outperformed bank-owned super funds, and a pillar of the success of our retirement system," ACTU assistant secretary Scott Connolly said.

But the Financial Services Council, representing bank-owned retail super funds, lined up in support of an expert panel. Under the proposed changes they would potentially get greater access to the $600 billion default super market.

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"Opening up the protected default superannuation system to greater competition and insisting on stronger governance and greater transparency will put more money in the pockets of consumers in retirement," chief executive Sally Loane said.

"The best funds, whether retail, industry or corporate, have nothing to fear from competition," she said.

The Association of Superannuation Funds of Australia, which represents both industry and retail funds, baulked at the idea of a much-consolidated industry and urged caution.


Chief executive Martin Fahy said savers would migrate en masse to the chosen 10 funds.

“Superannuation is an industrial right and comes from workers’ deferred wages," the ACTU said. Jessica Shapiro

"Let's say we start in 2020 and we go two or three cycles to 2032," he said. "The incumbent funds would by that stage be very, very large. They'd all be $200 billion plus."

After three or four cycles, "incumbency in that best in show would become self-fulfilling and oligopolistic in nature," Mr Fahy said.

"What I'm concerned about is the collateral damage and carnage that you might expose [the system] to in shutting down or impairing what are otherwise good performing funds. There are funds that beat the benchmark that would be cut off from default funding."

The default market is worth about $600 billion and, most importantly, funds with default status receive a lucrative and steady flow of cash.

"Industry super funds have long supported a merit based selection process of default funds. This is currently the role of the Fair Work Commission and is in the best interests of members," Industry Super Australia chief executive David Whiteley said. Luis Ascui

Based on a previous recommendation by the Productivity Commission and implemented by the former Labor government, Fair Work Australia is the body responsible at present for selecting which default funds are listed in modern awards, and most are industry funds.


Industry Super Australia chief executive David Whiteley said the existing system was in the best interests of members, and handing the power to choose default funds to another untried government body was "experimental, risky and unproven".

"To dismantle the Fair Work Commission process in favour of an unproven new government agency and require young workers to choose their super fund for life is high risk for younger members," he said.

Mr Whiteley also took aim at another of the commission's recommendations, which is that workers be defaulted into a fund only once in a lifetime.

Martin Fahy of the Association of Super Funds of Australia said picking 10 "best-in-show" funds would "dramatically change the retirement funding landscape, and raises questions with respect to innovation, competitive intensity and diversity". Jessica Hromas

"This means that teenagers are being asked to make decisions about their retirement. You couldn't find a cohort of our community less informed, less engaged and less interested in retirement than teenagers. It's quite baffling."

The commission found industry funds performed better than their bank-owned rivals, although funds of both types feature in a long tail of underperformance. The government asked the commission to come up with an alternative model for nominating default funds.

The Productivity Commission argues one default per lifetime would cut down on the 10 million unintended multiples in the system.

"We know that's costing workers more than $2.9 billion each year in unnecessary administration fees and insurance premiums, and it means their retirement balance will be $50,000 less than it would otherwise have been," Productivity Commission deputy chairman Karen Chester said. Workers would at all times be free to switch funds under the commission's blueprint.


After a three-year study, the commission concluded the super savings of millions are languishing in the one in four super funds that are underperforming.

The risks for young, disengaged workers being defaulted into an under performer are significant.

For example, at 21 on a full-time starting salary today of $50,000 a worker who is defaulted into one of the better performing funds would be $635,000 better off than had he or she been tipped into an underperforming fund.

The super review conducted by Jeremy Cooper and the Financial System Inquiry by David Murray had both recommended a shake-up of the composition of super fund boards, calling for at least one-third to be independent directors.

Financial Services Council chief Sally Loane said the plan deserved support. Sahlan Hayes

Mr Bowen said reforms to the system were inevitable after nearly 30 years.

"The recommendations appear to be sensible," he said. "Many of the recommendations are about putting members first, which must be at the centre of superannuation.

"The government of the day should be working with the entire superannuation system on reforms and measures which are good for superannuation."