With the Turnbull government’s superannuation reform bills before Parliament, hostilities have broken out between Revenue and Financial Services Minister Kelly O’Dwyer and the industry superannuation movement over the direction of governance reforms.
The new measures, some of which failed to pass the Senate before the 2016 election, include moves to mandate one third independent directors for super fund boards, greater accountability for investment and performance of funds and the right for ASIC to intervene where members best interests aren’t being served. They will also strengthen the penalties for fund directors breaching their duties.
Ms O’Dwyer said “none of these changes should be controversial. They are common sense” and are are “designed to improve the foundations of the compulsory super system that has been in place for a quarter of a century.”
“The Government’s changes will strengthen APRA’s powers to oversee poor-performing retail, industry and corporate funds and make all funds more transparent and accountable to their members for how they spend members’ money.”
However Industry Super Australia opposes board structure governance changes. It said the proposed changes would endanger the successful representative trustee model of superannuation that includes employer and employee representatives on boards.
ISA said the reforms also fell short by
- Failing to fix unpaid super;
- Failing to fix undisclosed investment fees and costs gouged from retail super fund members;
- Carving out the majority of bank-owned super fund assets from a new outcomes test;
The for-profit super sector, largely owned by banks and insurance groups, had underperformed the representative trustee style not-for-profit funds over both short and long time periods, ISA said.
Over one year to September industry funds have outperformed retail funds by 1.4 per centage points, 1.1 per centage points over five years, 0.7 per centage points over 10 years and 0.8 per centage points over 15 years according to researchers Chant West.
And misconduct from banks had cost their customers dearly, ISA said.
“In the two years since the Government last introduced the Trustee Governance Bill to the Australian Parliament, ISA estimates that the ANZ, National Australia Bank, Commonwealth Bank, Westpac, Macquarie Bank and AMP have collectively paid over $545 million in compensation and refunds as a result of admitted or alleged misconduct – much of it in wealth management and super. Industry super funds have not had to pay a single cent,” said ISA CEO David Whiteley in a statement.
“Yet despite this evidence, Minister Kelly O’Dwyer has pledged to: ‘lift superannuation funds to at least the same standard as other financial services organisations like banks and life insurance companies’,” he said.
Ms O’Dwyer highlighted the $21.7 million in revenues received by ISA from its 16 members and characterised it as being used for “lobbying”. However ISA public affairs director Matt Linden told the Senate Economics Committee that the money was in fact used for “research, policy development, government relations and advocacy as well as the well- known Industry Super Funds Joint Marketing campaign”.
Ms O’Dwyer said changes in the board governance model should not negatively affect industry funds. “Some of the most successful industry funds have already moved towards the model which incorporates one third independent directors, including an independent chair.”
“Well-performing industry funds have nothing to fear from the proposed changes. In fact, the best performing industry funds should perform even better,” she said.
Passage of the legislation will depend on the attitude of the Senate crossbench because it is opposed by the Labor opposition. Key powerbrokers like the Greens and the Nick Xenophon Team will be lobbied heavily by supporters and opponents of the changes.
*The New Daily is owned by industry super funds