CANBERRA, AAP – Peter Costello sees merit in a federal government-run superannuation default fund, but has made it clear the Future Fund that he now chairs could only manage the investments in such an entity.

He said it would be up to the government to set up such a fund.

“We don’t want to take private money into the actual Future Fund itself because that is a sovereign wealth fund,” Mr Costello told a media briefing on Thursday.

“But if you wanted to have a public default fund, you would have to have someone else collect the money.”

Liberal senator Andrew Bragg has called for an overhaul of the superannuation system, saying after three decades it has done little to get Australians off the aged pension and reduce pressure off the federal budget.

He called for a national default fund managed by the Future Fund.

“I think a public default fund has got a lot going for it,” Mr Costello, the country’s longest serving former federal treasurer, said.

“My view has always been the government is going to tell people that they have got to put aside their money into a fund, it makes sense to me for the government to run a low-cost default fund for that to go into.”

Mr Costello chairs the Future Fund that he set up as treasurer in 2006 to cover future super liabilities of public servants..

It now stands just under $200 billion, around three times the $60.5 billion that was initially contributed by the federal government.

“The Future Fund can manage money, there is no doubt about that,” Mr Costello said.

Aside from the Future Fund itself, it also manages five other funds – the Medical Research Future Fund, the Aboriginal and Torres Strait Islander Land and Sea Fund, the Future Drought Fund, the Emergency Response Fund and the DisabilityCare Australia Fund.

Mr Costello said the Aboriginal fund was set up long before the Future Fund came along, but its returns were not very good.

“The government decided to give it to the Future Fund to manage and the returns have been much better,” he said.

However, the Association of Superannuation Funds of Australia has slammed Senator Bragg’s idea, saying the industry is still in the process of implementing the latest round of major reforms which were legislated last month.

“So creating further confusion for Australians right now is perplexing, particularly given the strong performance of superannuation funds over the past year,” ASFA CEO Martin Fahy said.

Dr Fahy described it as an “illiberal idea”, inconsistent with a House of Representatives inquiry into the concentration and common ownership in the Australian share market, and would exacerbate the very issues which were the apparent cause of concern for this inquiry.