Super and choice: beware of the sharks

Although teachers in NSW public schools and colleges are not directly affected by the
introduction of "choice" to superannuation, the Federal Government's advertising campaign poses hazards. JOHN DIXON reports.

The Commonwealth legislation which comes into effect from July 1 does not as yet apply to NSW public sector employees. The Commonwealth has stated its view that employees covered under state awards should come under the "choice" legislation a year later than other employees; for NSW public sector employees this would be from July 1, 2006. Should this be the case there will still be no substantive change for NSW public school teachers.

The Commonwealth legislation provides an exemption to choice for members of a defined benefit scheme. Members of the State Superannuation Scheme (the "old" scheme) and the State Authorities Superannuation Scheme (the "middle" scheme) are members of such schemes and are therefore exempt from the provisions of the choice legislation.

The majority of teachers are not in the older schemes. For the majority of teachers, choice already applies and has done so since December 1992.

When the Superannuation Guarantee legislation came into effect for NSW public sector employees in 1992, the state government established First State Super. However in doing so the state government determined that it would pay superannuation contributions to any superannuation fund nominated by an employee as long as that fund was regulated by the Commonwealth. A number of teachers have their superannuation contributions directed to funds other than First State Super.

The major concern for teachers and other workers is not the introduction of choice but the massive amounts of money that will be expended in trying to convince them to move their superannuation monies into inferior products which either have high fees, under perform or both.

There is no doubt that the Federal Government is hoping that the banks and retail end of the insurance industry will profit from the introduction of choice. These organisations are interested in returning profits to their shareholders rather than contributors.

By contrast, the industry funds and public sector funds such as First State Super are not-for-profit organisations focused on providing returns to contributors.

The ACTU has expressed concern regarding another aspect of the "choice" legislation.

The ACTU says financial planners should be banned from receiving commissions for pushing workers' retirement savings into super funds.

ACTU secretary Greg Comber says the commissions are a major threat to industry super funds, as they refuse to pay planners for bringing them in business.

"The ACTU is worried that when the new 'superannuation choice' laws take effect from after July 1 unscrupulous financial planners will move their clients' super from one fund to another -- in processes known as mis-selling and churning -- to gain more commissions and fees," Combet says.

"Higher fees will eat into employees" super accounts and ultimately leave them worse off when they retire."

The message to teachers is to exercise great caution in considering the highly resourced efforts that will occur from July 1 inviting them to change superannuation arrangements.

John Dixon is Assistant General Secretary (Communications and Administration).

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