The federal government has reportedly given up on plans to radically alter the way industry superannuation funds are governed, after royal commission revelations trashed its chances of getting the bill through the Senate.
The Australian Financial Review reported on Tuesday that the ‘Strengthening Trustee Arrangements’ bill had been “dumped” by the government after revelations of misconduct by bank-owned retail funds.
Bank-owned, for-profit retail super funds have been the most prominent supporters of the bill, which would have made the boards of not-for-profit industry super funds more like those of retail funds.
The dumping of the bill, the report claimed, happened before Scott Morrison took over as prime minister, and before the issue passed to the bailiwick of newly-appointed treasurer Josh Frydenberg.
A spokesperson for Mr Frydenberg said there had “been no change to the policy”, but did not elaborate.
But second-hand sources told The New Daily that, while the bill would remain on the books, there would be no attempt to get it through Parliament. If true, this would amount to the bill being dumped.
The bill, which is supported by retail funds but fiercely opposed by industry funds, mandates at least one-third of trustees to be ‘independent’, including the chair.
That would be a fundamental change to the current structure of industry super funds, which sees boards made up of 50 per cent employee (normally union) appointed trustees, and 50 per cent employer appointed.
Industry super funds argue the equal representation model is desirable because it ensures the interests of all stakeholders, employees and employers, are equally represented.
Retail funds, meanwhile, generally have a majority of independent directors, which they argue avoids conflicts of interest.
The retail fund argument is falling down
This argument, however, was brought into serious question during the superannuation hearings of the financial services royal commission earlier this month.
While industry funds by and large avoided controversy, retail funds were questioned on apparent serious breaches, including charging fees for no service, using loopholes to maintain commissions after they were banned, and charging fees to dead people.
One of the most dramatic sessions involved the grilling of Nicole Smith, the recently-retired chair of the board of trustees of NAB’s super fund NULIS.
On Friday, counsel assisting the royal commission made the damning conclusions that retail funds often prioritise the needs of financial advisers, who receive the commissions, over those of customers. Counsel assisting Michael Hodge, QC, said trustees “by necessity” were implicated in this.
He said the trustees of retail funds may have been breaching the SIS Act, the ASIC Act, and the Corporations Act, and recommended law changes to ensure trustees only consider the needs of superannuation fund members.
Industry funds call for ‘co-operative relationship’
Following reports the government had scrapped its board reform bill, Industry Super Australia, the peak body representing industry funds, took the opportunity to call for a “co-operative relationship”.
“There is an opportunity to reset the relationship and focus on practical measures to help Australians save for their retirement,” ISA’s public affairs director Matthew Linden said.
“Australians need a system that they can trust and will deliver them the best possible returns. Fee gouging, hidden commissions and preferencing profits over members has no place in our system.
“As well as cleaning up the system, closing the gender super gap and tackling unpaid super are vital issues that should now be prioritised. And we would welcome a serious discussion about how super fund investment can tackle the infrastructure challenges of our growing population.”
The Financial Services Council, which represents retail superannuation funds, did not respond to unconfirmed reports the bill was being dropped.
The New Daily is owned by Industry Super Holdings, which is owned by a group of industry super funds.