Industry superannuation funds facing government overhaul lobby senators
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Version 0 of 1. Industry superannuation funds have begun lobbying crossbenchers to oppose the Abbott government’s planned overhaul of the sector that would weaken the role of unions on boards. Industry Super Australia and the Australian Council of Trade Unions are campaigning against the changes, armed with figures showing that industry super funds have delivered better returns to members than retail funds. On Friday the government published draft legislation to require all super fund trustee boards to have an independent chair and at least a third of the directors to be independent. This would change existing arrangements, whereby industry super funds typically have boards with an equal number of employee and employer representatives. The assistant treasurer, Josh Frydenberg, said the measures would “substantially strengthen governance arrangements for the benefit of fund members”. “Independent directors bring additional experience and expertise to boards making a valuable contribution to their decision making,” he said, calling for public feedback on the draft legislation. But Labor and the Greens questioned whether the government had made the case for change, raising the possibility that the Coalition may to have to rely on crossbenchers in the Senate. Industry Super Australia pointed to figures from the Australian Prudential Regulation Authority showing the average rates of return for funds between 2004 and 2013. Industry not-for-profit funds achieved returns of 6.7%, compared with 4.9% among retail for-profit funds, the report showed. The chair of Industry Super Australia, Peter Collins, who is a former New South Wales Liberal leader, said the government should not impose a “one size fits all” approach on the sector. Collins attributed the proposed changes to “the pressure that has been exerted by the Financial Services Council and by bank-owned funds on the Abbott government”. He said the government should heed John Howard’s advice that “if it isn’t broken don’t fix it”. “We’ve put a lot of time into talking to all sides of politics to ensure they’re aware of what’s at stake in these governance issues and to remind MPs how well industry funds have performed under their existing structure,” Collins said. Union leaders said the government was pursuing “an ideologically driven attack on workers” without any evidence that equal representation was failing members. “This government can’t bear it that the trade union movement, along with employer associations, has overseen an amazing success story in superannuation,” the ACTU president, Ged Kearney, said. “Industry super funds have lower fees and consistently delivered better returns over any time period for millions of Australians.” But the Financial Services Council, which represents retail funds, called on parliament “to pass these reforms to strengthen consumer protections in the superannuation industry and which aim to prevent any conflicts of interests”. The council’s chief executive, Sally Loane, said independent directors would ensure that the interests of consumers were put ahead of the interests of shareholders or a sponsoring organisation. “As superannuation grows from $2tn today to $7tn by 2035, good governance will be imperative for protecting consumers from potential conflicts of interest that may arise on boards of superannuation funds,” she said. Labor has not locked in its position on the changes, but echoed the argument that industry super funds had performed strongly. The Labor leader, Bill Shorten, said the party would consider the government’s proposals carefully yet it was important to “get some facts into this debate”. “We’ve seen superannuation funds including industry funds deliver some great returns to their members over the last two years, but here’s the government putting politics ahead of the case for change and what they’re trying to do is interfere with some of these funds and the governance structure,” he said. The leader of the Greens, Richard Di Natale, dismissed the government’s proposal as a “union-bashing exercise” and said the biggest change the super system needed was a reduction in tax breaks for high-income earners. “What we need in super is a simple reform that ensures that super is not a vehicle for tax minimisation for people on high incomes ... everything else is a distraction,” he said. The independent senator Nick Xenophon said he wanted to talk to the government and examine the details before committing to a position. “I’ve got an open mind but ultimately this is about making super funds work. The key test is how do you make super funds more transparent, accountable and deliver better returns to their members.” The Abbott government-commissioned financial system inquiry’s final report suggested there should be “a majority of independent directors” on boards – but the proposed legislation sets a one-third minimum. The legislation provides for a three-year transition period. The new governance rules will not apply to self-managed superannuation funds, according to the explanatory notes. The criteria for “independent” directors include people who are not substantial shareholders of the licensee or do not have or have not had within the last three years a material relationship with the licensee, including through their employer. The Business Council of Australia praised the Coalition for “sensibly modernising” governance arrangements. National Seniors – a lobby group for over 50s – also backed the proposal as “a step towards international best practice”. It said lower fees and greater employee choice of super funds should be next on the agenda. The government is accepting submissions on the draft legislation until 23 July. |