By Ben Butler
PRIME Minister Julia Gillard has avoided a showdown with the powerful financial services industry by watering down key recommendations to overhaul the superannuation industry.
Retail funds that run for profit have been pleased that they might get their hands on some of the money currently given to industry funds under industrial awards in one of the changes to the proposed no-frills MySuper system.
At the same time, Ms Gillard has kept the non-profit industry fund sector on side by endorsing MySuper, which industry funds hope will drive retail funds out of the market.
The emergence of a fragile consensus over MySuper has dampened the long-running and heavily politicised stoush between the two halves of the superannuation industry over issues including fees, commissions and market access.
But the future of MySuper under a Coalition government is uncertain, with opposition financial services spokesman Luke Hartsuyker declining to offer a position on it.
Jeremy Cooper, the former deputy chairman of the Australian Securities and Investments Commission who led the review of the super system, designed MySuper to be a low-cost, simple product for workers who are not interested in actively managing their savings.
Treasury estimates it would add about $40,000 to the average worker's retirement nest-egg.
Ms Gillard's policy differs from Mr Cooper's recommendations by allowing super funds more flexibility in how they invest workers' money.
The ''life-cycle allocations'' mean that fund managers would invest younger workers' money in higher-risk, higher-return assets.
But as retirement age approached, the focus would shift to conservative investments that preserve the nest-egg.
In a move designed to cut red tape, Ms Gillard has also watered down Mr Cooper's recommendation that offering a MySuper product would require an entirely new licence.
Under the new ALP policy, a MySuper licence ''could be a variation to existing arrangements''.
In addition, Labor has opened the door to competition in the default fund market, which funnels money to industry funds under the award system.
While Mr Cooper said the question of which funds qualify for default status should be looked at by the Productivity Commission, under ALP policy, eligibility will be regularly reviewed ''based on objective criteria and evidence''.
John Brogden, the head of retail fund lobby group the Financial Services Council, said he was pleased with the changes to MySuper and called on the government to do more to promote competition.
''At the moment union/industry super funds have a monopoly on superannuation in awards through Fair Work Australia,'' he said.
''Opening the default market to competition is crucial to ensuring fees continue to be driven down.''
Alison McIvor, the deputy chief executive of Industry Super Network, said the changes to default fund rules were quite different to what was in the Cooper review report.
''We would be hoping to protect our position,'' she said.
She said the FSC's position on MySuper was surprising but welcome. ''What we're talking about here is really the industry fund model being applied to all products across the board,'' she said.
''I was surprised that the retail funds association is actually saying they want costs driven down even further. I think that's fantastic.''