Future Fund chairman Peter Costello has warned that Australian super funds should expect to be regulated in the same way as banks because the industry was now an important pillar of the financial system.

In a keynote address to the annual conference of the Association of Superannuation Funds of Australia in Melbourne, Mr Costello said the super industry was managing almost $1.8 trillion of members’ funds.

“That’s bigger than the banking system,” he told the conference.

“So, the focus is going to come on this industry.”

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Mr Costello said super funds should be subject to higher standards of governance that already applied to banks, including a requirement for all trustees of super funds to be independent.

“Superannuation has moved beyond being an industrial matter from the mid-1980s,” he said.

“You are just going to get higher levels of fiduciary duty.”

Super funds are an important pillar of society. Photo: Shutterstock

Mr Costello’s comments come at a sensitive time for the not-for-profit super fund sector, which have member, union and employer representation on their boards.

He said super funds would have to adapt to ever-increasing requirements to disclose information to members.

“The demands for disclosure are never going to decrease – they are always going to increase,” he said.

“The problem with all this information is what do people do with it?”

Mr Costello also questioned the strategic objectives of some super funds which viewed themselves as national development funds or environment funds, in addition to their role of managing the retirement savings of members.

“Sometimes you can ask people to meet too many conflicting objectives,” he said.

Mr Costello also dropped a tax bombshell on the conference, saying that the policy makers were likely to review the system of dividend imputation that he introduced as treasurer more than a decade ago.

Under existing tax rules, super funds and small investors do not have to pay tax on dividends received from listed companies that pay tax at the 30 per cent corporate tax rate.

However, concerns have been raised that such tax arrangements may have encouraged super funds to over-invest in listed companies at the expense of other investments, including the corporate bond market.

Super funds also get so-called “excess imputation credits” on dividends they receive from Australian companies.

The Financial System Inquiry chaired by David Murray has raised concerns that the tax system may have created a investor bias towards listed companies that pay dividends.