Industry funds push back on reform plans
Funds in the non-profit super sector, which has more members but less money than their for-profit and self-managed counterparts, say the make-up of their boards has contributed to their outperformance.
A government paper released on Wednesday sought feedback on what proportion of super board members should be independent, and raised the prospect of trustee boards having independent chairs.
Industry funds have an equal number of employer and employee representatives on their trustee boards.
By contrast, the super boards of big retail funds such as AMP, Challenger, ANZ Wealth and Colonial will comprise a majority of independent directors and have an independent chairman by July next year.
David Whiteley, the head of industry super lobby group Industry Super Australia, said any change by the government must be driven solely by a desire to boost member returns.
"What is evident is that the [50-50] representative trustee model has delivered superior returns over the long term," he said.
The discussion paper, released by Assistant Treasurer Arthur Sinodinos, canvassed whether super fund directors should be subject to regular performance appraisals, and capping the terms of directors.
A retail fund lobby group, the Financial Services Council, welcomed a proposal to strip the industrial umpire, the Fair Work Commission, of its power to select default super funds in employment awards, saying it would boost competition and transparency.
A 2012 report by the Productivity Commission estimated that between $6 billion and $9 billion in super contributions were made to default funds; that is, funds for members who do not choose their own.
Coalition backbencher Paul Fletcher this year accused the union movement of using the $1.75 trillion sector to boost its influence; industry funds have long pointed to their cheaper fees and therefore outperformance.
Alex Dunnin of super research group Rainmaker said the government's paper was "free of ideological dog-whistling" and could produce unpredictable outcomes.
Mr Dunnin said the previous government's StrongerSuper package - requiring funds to offer a simple, low-cost default super product called MySuper - had revitalised the country's retail sector.
"This is why predicting who will be winners and losers from this latest review may not be as easy as it first seems."
Frequently Asked Questions about this Article…
Industry superannuation funds believe that their current board structure, which includes an equal number of employer and employee representatives, has contributed to their superior long-term returns. They are concerned that appointing independent directors might disrupt this successful model.
The government is considering proposals to appoint independent directors to superannuation fund boards and to allow for-profit rivals to compete for business through industrial awards. Additionally, there is a discussion about having independent chairs and regular performance appraisals for directors.
The proposed reforms, such as allowing for-profit funds to compete via industrial awards, could increase competition and transparency in the superannuation sector. This might lead to more options for members and potentially better services.
Retail fund lobby groups, like the Financial Services Council, support the proposal to remove the Fair Work Commission's power to select default super funds in employment awards. They believe this change would enhance competition and transparency.
Industry funds argue that their current board structure, which includes equal representation from employers and employees, has led to better performance and lower fees. They believe any changes should focus on improving member returns.
The discussion paper, described as free of ideological bias, could lead to unpredictable outcomes. It seeks feedback on various aspects, including the proportion of independent directors and the performance appraisal of directors.
The StrongerSuper package required funds to offer a simple, low-cost default super product called MySuper. This initiative revitalized the retail sector by providing a straightforward option for members who do not choose their own funds.
Predicting the impact of the latest review is challenging because the outcomes are uncertain and could vary widely. The review's proposals could lead to significant changes in the superannuation landscape, affecting both industry and retail funds differently.
Call 1300 880 160
Start a chat
Schedule a call
