If being forced to have a third of trustees be classified as independent (including the chair) – note that Cbus calls John Dawkins an independent director (Cats: stop that laughing) – is not bad enough, the mean federal government now wants to remove the monopoly position of union industry super funds in respect of default funds specified in Modern Awards.
Chief shrill lobbyist, David Whitely (pictured), gives the game away by declaring that 80 per cent of workers don’t make a choice of super fund (this figure is completely rubbery; virtually all workers on union enterprise agreements are given no choice at all, eg. universities). But let’s run with that figure. It makes the exclusive positioning of industry super funds listed in Modern Awards (there are hardly any others) the key to the massive automatic flow of funds to these favoured funds.
Of course, the solution is simple: remove superannuation from the industrial relations regulation (it should never have been there) and simply provide employers with a list of MySuper funds from which to choose. In the meantime, the government might want to run a campaign encouraging workers actually to make the choice of super fund themselves.
But the industry super funds are not having a bar of it. They will quote their higher returns (ignore the duds and ignore the dubious valuations put on direct investments in which industry funds can invest because they have few liquidity constraints because of their monopoly position in respect of default funds) as a defence for their ongoing monopoly position.
And now they are using industry superannuation members’ money (Industry Super Australia has no money of its own) to campaign for the retention of the default fund monopoly.
Is this appropriate? The super fund trustees have a sole responsibility to maximize the financial benefits of members; it is neither here nor there for existing members whether the default fund arrangement continues.
Now no doubt there will be some fudging of the information – the money is coming from Administration Fees levied on super funds members not from members’ investment accounts.
I just don’t think this is good enough. The use of Administration Fees (used to fund the dud newspaper venture, the unloved and unread New Daily – remember that fiasco) should still be used for purposes to benefit existing members, not to defend the empires of industry super funds.
So APRA – step up to the plate. You need to kill off this inappropriate spending by the industry super funds before it commences.
(I can easily take this stand because David Whitely’s pathetic defence of industry super fund, NUW’s LUCRF’s contribution to IR21 to fund Bill Shorten’s campaign against Anthony Albanese to be Labor leader is that APRA will take a look at it if there is anything untoward. Oh please. Some teenagers in APRA wrote a report that governance in superannuation was pretty OK back in 2012. Oh please again.)
Here is the story:
Industry superannuation funds are launching an aggressive advertising campaign against what they fear is an imminent move by the Abbott government to make it more difficult for them to be the “default” for employees who do not nominate a fund for their superannuation.
These contributions are estimated to be worth between $6bn and $9bn a year and because historically the “default” fund was set as part of industrial negotiations, the union funds dominated.
The recent financial services inquiry recommended a continuation of the most recent system – where a “default” fund is decided through the Fair Work Commission – but the big banks have been lobbying for employers to have free choice.
And in a recent speech, the assistant treasurer, Josh Frydenberg, said he wanted to unleash the “strongest possible competitive forces for the benefit of every superannuation fund member”.
Industry Super cites research showing that over the last decade industry funds have delivered higher returns to their members and accuse the big banks of “embarking on a major government lobbying campaign to design superannuation regulations to suit their business model.”
The chief executive of Industry Super, David Whiteley, said the banks wanted to be able to “bundle” their business banking services and the super arrangements for a business’ employees – an offer he said would benefit the business but not the workers.
The Financial Services Council – which represents the bank-backed retail funds – said more competition over default funds would bring down fees.
“The banks seem to stop at nothing to get their hands on Australians’ super savings,” Whiteley said.
“The retail and bank-owned super sector has failed to deliver competitive investment returns and are seeking to create an unlevel playing field that suits their business model potentially at the expense of Australians’ super savings”.
The government’s response to the financial services inquiry headed by David Murray is expected within weeks.
The Industry Super ad campaign will run through October and include billboards, digital airport screens in Qantas business lounges, online videos, social media and TV sponsorships in the AFL and Sky News.