FORMER finance minister Lindsay Tanner has warned the superannuation industry that it risks government intervention if its long-standing bias towards investing in shares sparks a public backlash.
Mr Tanner, who left Parliament in 2010, said the industry needed to take seriously warnings from the likes of Super System Review head Jeremy Cooper, former chairman of the Future Fund David Murray and former Treasury head Ken Henry that "our super fund system is over-exposed to equities".
While cautioning that he was not personally asserting super funds were too exposed to shares, he said he was "troubled" by the responses from some in the industry to what he said were "legitimate" issues raised by Mr Cooper, Mr Murray and others.
Speaking at a conference in Melbourne yesterday, sponsored by corporate governance company Ownership Matters, Mr Tanner said the super system was a "captive market, with a pool of money that is mandated", which benefited from tax and regulatory preferences.
"For people engaged in this debate, even though I'm not advocating it per se, I warn you to be wary that we are dealing with a very big and serious issue people's retirement incomes, and it is not good enough just to say we are out there just chasing the best short-term returns and, on average, over the millions of people involved, it all ends happily ever after," he said.
"That risk of government intervention is serious."
Mr Tanner said while in government, he had always advocated against any government mandating of the structure of super.
"But . . . if governments in the future of either side are faced with extremely unhappy super fund members because they have been on the wrong side of the equity cycle . . . that will generate enormous political pressure," he added.
Mr Tanner called for more debate around what he said was a separate but "undeniably linked" issue Australia's thin corporate bond market.
Mr Tanner said with corporate balance sheets "already as lightly geared as we can ever expect them to be" and with the proportion of savings in super set to rise as the superannuation guarantee rose to 12 per cent, "if we are to meet the needs of our economy then more of our savings in our super funds is going to have to do the heavy lifting on corporate debt."