Finance Your Super Proof of super reform package will be in its oversight of bank funds
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Proof of super reform package will be in its oversight of bank funds

New Super legislation
Kelly O'Dwyer has carriage of new super legislation. Photo:AAP
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A raft of superannuation reforms released on Monday have the potential to improve super savings for millions of Australians by giving regulators the power to demand funds serve members.

But the effectiveness of the package depends on whether it can tackle the fees charged by bank-owned superannuation funds, according to David Whiteley, CEO of Industry Super Australia.

“The litmus test to the reforms is whether or not regulators investigate and make conclusions about whether the conflict between member interests and shareholder returns is the cause of consistent underperformance of bank owned super funds,” he told The New Daily.

As part of the legislative package, announced by Financial Services Minister Kelly O’Dwyer, the Australian Prudential and Regulation Authority will review the performance of the default MySuper funds that receive 60 per cent of workers’ contributions annually to ensure they are operating in members’ interests.

A statement released by Ms O’Dwyer said the review will “consider the investment and insurance strategies, fees, scale and returns are promoting the financial interests of MySuper members.”

APRA will have new powers to cancel the MySuper licences of default funds deemed to not be performing for members.

APRA should also consider “why bank-owned super funds have underperformed industry super funds for such a long period,” Mr Whiteley said.

The new measures aim to improve the governance of all pooled super funds by requiring them to report and publish clearer information annually on how the fund is being managed.

This will include detail on how fees are set and how members’ money is spent. They will also be required to run annual member meetings in the way public companies do for shareholders.

Ms O’Dwyer told The New Daily that “APRA has been given broad powers and will no longer rely on moral suasion. It can inquire and then intervene, make orders and if they are not followed there will be consequences.”

The new legislation will also include the closure of a legal loophole that allows employers to substitute workers’ voluntary salary sacrifice contributions for the super guarantee payments they are obligated to make. This loophole is estimated to cost workers as much as $1 billion a year.

Mr Whiteley said while ISA supported any improvements in consumer protections, the government “has not gone far enough in acting on unpaid super.”

ISA research earlier this year estimated that underpayments of super entitlements were as high as $5.6 billion a year.

However, Ms O’Dwyer said “the government is looking at recommendations made [by a working group she established and parliamentary committees] and will make announcements at the appropriate time.”

Martin Fahy, the CEO of the Association of Super Funds of Australia, supported some of the measures announced.

“ASFA of course is supportive of any measures that lead to better retirement outcomes for fund members,” Dr Fahy told The New Daily.

However, he said the package could be viewed as “largely about more reporting to APRA rather than measures that will directly improve retirement outcomes for fund members”.

“Giving APRA powers to target and take action against underperforming funds that are not delivering sound member outcomes may be a better approach than burdening the vast majority of superannuation funds that are performing well,” he said. 

Ms O’Dwyer said the legislation to support the measures would be introduced at the next parliamentary sitting after consultation with the industry.

* The New Daily is owned by a group of industry super funds