The creation of compulsory superannuation was a powerhouse reform of 1980s that helped modernise our country.

Super became every worker’s right, regardless of gender, income or employment pattern. In just 30 years, we can take pride in having built a $1.8-trillion system regarded as one of the best in the world.

Australia’s industry super funds have contributed mightily to this pool of national savings which will increasingly play a pivotal role in the growth of our economy.

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The funds’ undisputed success is founded on their undivided loyalty to members. They have been scrupulously governed over the years by trustee boards made up of representatives of employees and employers with expertise in super and knowledge of the industries they are representing.

This is the established model of pension fund governance across the OECD, and a proven formula here at home with industry super delivering higher investment returns to members, on average, than bank and retail funds for more than a decade.

Workers could find saving for retirement very difficult. Photo: Shutterstock

Worker protections

At the heart of our system is the super safety net – this ensures that workers who do not choose their own fund are automatically placed into a well-performing fund. The importance of this is profound because an estimated eight million workers don’t select their own fund. Disengaged, they rely on the workplace fund chosen by their employer. To ensure a decent return for staff, employers must choose from a safety net of better-performing funds selected on merit by the Fair Work Commission. 

Not surprisingly, industry super funds, with historically superior returns and low costs, make up a large part of the safety net. 

This steady arrangement has allowed industry super to begin investing in big-ticket, long-term projects, particularly infrastructure. This strategy is uppermost in the thinking of the funds. These investments boost national productivity, and in turn will produce higher wages and super contributions. We estimate that long-term investment in the real economy could deliver a 31 per cent boost in retirement savings.

Decision time

However, the sector is at a crossroads. If we choose the right direction we will maximise super savings and the pool of capital to drive economic growth and productivity. The wrong path, the wrong choices, will shrink returns, stymie investment, force many people to work past 70 and unfairly saddle younger workers with a crushing tax burden by 2050. We have a responsibility to do everything in our power to avoid that. 

The right direction – ensuring that a strong super safety net continues to underpin serious investment – is obvious, and fundamental to the task. But not everyone embraces this logic.

The banks are lobbying hard to scrap the safety net and replace it with a system designed to suit their vertically-integrated business model, which is geared towards profits and dividends to shareholders.

They want to be able to bundle business banking with employee super arrangements and sell this to employers. They don’t want to have to compete on investment returns to members. There has been much talk about “competition” being good for consumers, but this would be an extremely anti-competitive move: only the Big Four can bundle services and the consumers they are seeking to entice don’t include the employees on the receiving end of this arrangement.

The banks would also be paying incentives to planners and bank staff to make these sales, treating super as just another product. As we know, commissions and sales incentives have been at the heart of every financial advice scandal in recent years. Billions of dollars have been lost in failed schemes based on inappropriate financial planning advice. More than 100,000 Australians have lost their life savings. These scandals continue to dog the banks and yet they are still pressing our lawmakers to water down tougher financial advice protection for consumers at the same time as they are lobbying to remove the safety net that protects super.

Industry super funds will fight hard to stop the banks eroding a super system that is the envy of the world, but if you want to give yourself an even chance of retiring before 70, now is the time to take an active interest.

Start by asking where your boss is parking your money and satisfy yourself that your hard-earned nest egg will remain in good hands. 

David Whiteley is Chief Executive of Industry Super Australia.