Let’s face it – compulsory superannuation for all Australian workers only came about as a result of a strong push by the union movement culminating in the 1992 introduction of a mandatory super payment of 3% of income.
Before that time super was mainly the prerogative of the wealthy and the public service only. Industry funds were established with the introduction of compulsory super for all workers and with this innovation came the governing principle of equal representation on industry fund boards.
This means an equal number of employer appointed directors and employee appointed directors make the important decisions regarding their membership. This model has served workers well with industry funds significantly outperforming retail (bank owned) funds over the medium and long terms providing a more comfortable and dignified retirement for their members.
During the 10 year period to June 2017 (which includes the GFC), the average industry fund (default option) returned 5.2% per annum; the average retail or bank owned funds have returned 4.4% for the same period. (Chant West Press Release 19/7/2017)
Yet, the government persists in attacking industry funds by introducing bills to break the equal representation structure and requiring industry fund boards to have one third of directors classified as ‘independent’ and the board chair as an ‘independent’.
The Trustee Governance Bill, which was defeated in the Senate in 2015, is again being brought forward as a viable model by the government. Financial Services Minister Kelly O’Dwyer promised in 2016 to “lift superannuation funds to at least the same standard as other financial services organisations like banks and insurance companies”. Yet in the past two years, “banks and related parties have paid around $480 million in refunds and compensation to customers as a result of admitted or alleged misconduct” said Matt Lindon of ISA.* No need to mention the bank scandals, but the irony of the statement is glaring!
Wouldn’t it be great if common sense prevailed in the world of politics in relation to superannuation? Do we really want our industry funds to operate more like big banks? And why is there such an ideological bent against industry super funds when they have outperformed the bank owned funds over significant periods of time? After all, there is a common goal and that is to provide the best possible retirement outcomes for all Australian workers and their dependants.
The Australian Institute of Superannuation Trustees (AIST) CEO, Eva Scheerlinck, stated in a recent media release, “The removal of the equal representation model from the legislation will remove the guaranteed voice of the members and the employers, which currently ensures a balance in decision making and a true understanding of the membership.”
The AIST has recommended that the Senate again reject the ideologically driven push by the government to mandate a new governance model for industry funds as empirical evidence says the structure is functioning well in producing superior returns for members.
And a final word from Industry Super Australia’s Matt Linden, “Industry super funds on average have consistently outperformed bank owned retail funds on member returns; invested in vital nation building projects; and fought for the economic security of older women, fairer pension changes, and consumer protections in financial advice”.
*More like the banks, no thanks! Matt Linden (ISA Press Release 10 October 2017)