THE drums are beating for change at the top of one of the country's biggest super funds, MTAA Super, ahead of crisis talks before the launch of a motoring body which has a mandate for radical change.
The Australian Motor Industry Federation (AMIF), launched in Melbourne yesterday, was spawned out of the old Motor Trades Association of Australia Limited (MTAA). It was renamed because motor association members felt the MTAA brand was confusing and had been dogged by too much controversy.
MTAA Ltd, which is owner of the trustee, and which is now part of the AMIF, will put the blowtorch on the MTAA Super Fund, which has been one of the worst-performing industry funds, and is being closely monitored by APRA.
MTAA Ltd owns all the shares in MTAA Super. This gives it the right to nominate four of the eight directors on the super fund.
It is believed that at a meeting on Sunday several resolutions were put that revolved around changes at the top of MTAA Super.
MTAA Super has been under scrutiny from financial regulator APRA since 2004 when APRA raised concerns about the trustee's organisational structure and potential for conflicts of interest. APRA has also addressed other corporate governance issues, it was revealed in a federal court case last year.
It comes as BusinessDay can reveal that a letter written by Michael Delaney on August 4, 2010, to MTAA's lawyers Greenfields reveals that APRA's 2010 Review Report on MTAA was "sharply critical on many matters, extended the trustee's supervisory standing, demanded a range of things, suggested others and was in serious error in a variety of ways and things".
The letter disclosed that the review was so critical that a workshop of directors and executives was convened to engage in a line-by-line analysis on July 28.
Another letter written by Delaney to the trustee directors, and published in this column on Monday, lifted the lid on the fraught relationship between MTAA and APRA in recent years.
According to the letter, the relationship has deteriorated in recent years and culminated in APRA issuing the trustee with a Show Cause notice. An MTAA spokesman said the Show Cause notice was not about its licence, but he declined to give more details. He also said both letters were written almost a year ago and therefore were not contemporary.
Interestingly, the letter to trustee directors notes that the trustees were scheduled to meet on August 25, to discuss various issues including matters and prospects with APRA.
A day after the scheduled meeting, MTAA Super chairman Allan Hawke resigned. At the time Delaney announced: "With regret I confirm the resignation of Dr Allan Hawke as chairman of MTAA Super, effective from August 26, 2010. Allan has been unwell for several months and has been medically advised to resign his position, which he has chosen to do immediately in order that the trustee may commence the task of finding a replacement without delay."
Eight days later, ACT Chief Minister Jon Stanhope outlined on his website that he had hired Hawke to review the ACT's public sector immediately.
MTAA made investment losses of more than $1.5 billion last year and was one of the worst-performing industry funds.
The publication of contents of the letter from Delaney to trustee directors has caused a lot of debate about why it has taken APRA so long to make an announcement about MTAA and the issues it has had with the super fund and its trustee.
Ian Field, executive director of MTA Queensland, one of the motoring association members, said it was time for a change at MTAA Super. He said the motoring associations recommended the MTAA Super fund to its members, which was a problem. "I feel personally embarrassed given its performance has been so poor for the past few years and I'm not satisfied that it was due to the GFC," he said.
Field said the recent appointment of John Brumby as MTAA Super chairman was a breath of fresh air, but some other directors needed to be replaced. The issue of MTAA's performance raises questions about the country's default super fund scheme. The regulatory separation between APRA and the Fair Work Australia framework for default super means that APRA cannot remove a super fund from an award as the Fair Work Australia (FWA) has legislative power over default fund selection.
Even more disturbing is that FWA decided in 2008 against using any criteria or developing a process for default fund selection.
This decision was despite then federal minister for super Nick Sherry asking it to do so in a submission in 2008 to the Australian lndustrial Relations Commission on award modernisation and default superannuation funds.
The upshot is because no criteria are used for selecting a fund in an award, APRA and ASIC do not have the legislative capacity to remove a fund.
Put simply, the system is devoid of any process for delisting funds even where the prudential or consumer protection regulator has identified a problem.
There is also no process available for delisting a superannuation fund from an award. With so much at stake, it is an issue in desperate need of reform.
Publication of contents of the letter . . . has caused a lot of debate about why it has taken APRA so long to make an announcement.
Frequently Asked Questions about this Article…
What is MTAA Super and who controls the fund?
MTAA Super is an industry superannuation fund historically linked to the Motor Trades Association of Australia. MTAA Ltd owns all the shares in MTAA Super and, under the current structure, has the right to nominate four of the eight directors on the fund's trustee board.
Why has MTAA Super been under APRA scrutiny and what did the 2010 review find?
APRA has monitored MTAA Super since 2004 over concerns about the trustee's organisational structure and the potential for conflicts of interest. A 2010 review was described in correspondence as 'sharply critical on many matters,' prompting workshops, further scrutiny and even a Show Cause notice to the trustee.
How badly has MTAA Super performed and what losses were reported?
The article reports MTAA Super was one of the worst-performing industry funds and made investment losses of more than $1.5 billion in the referenced year.
What is the Australian Motor Industry Federation (AMIF) and what does its launch mean for MTAA Super?
The Australian Motor Industry Federation (AMIF) was launched after members felt the old MTAA brand was confusing and controversial. MTAA Ltd is now part of the AMIF, and the new motoring body has said it intends to push for significant change at MTAA Super, effectively turning up the pressure on the fund's governance and performance.
Can APRA or ASIC remove a poorly performing super fund from an award or delist it?
No. The article explains that Fair Work Australia (FWA) has legislative power over default super fund selection, and FWA decided in 2008 not to use criteria or a process for choosing default funds. Because no award-selection criteria exist, APRA and ASIC do not have the legislative power to delist a fund from an award, leaving no formal delisting process even when regulators identify problems.
What conflict-of-interest concerns does the article highlight about MTAA Super?
One concern noted is that motoring associations recommended MTAA Super to their members while MTAA Ltd owned the fund and could nominate trustee directors, creating perceived or actual conflicts. APRA has previously raised issues about the trustee's structure and potential conflicts of interest.
Have there been leadership changes at MTAA Super recently?
Yes. The article notes the resignation of MTAA Super chairman Dr Allan Hawke effective August 26, 2010, and it refers to the recent appointment of John Brumby as MTAA Super chairman, which some members described as a 'breath of fresh air.'
What does the article suggest everyday investors should watch for regarding MTAA Super and default superannuation rules?
The article highlights systemic issues — notably that regulators cannot delist default funds and that the FWA chose not to apply selection criteria — so everyday investors should watch regulator announcements, governance changes at MTAA Super and actions by the new AMIF. The coverage signals a broader need for reform in how default super funds are selected and removed.
Call 1300 880 160
Start a chat
Schedule a call
