Forcing the deferral of the government’s vital superannuation industry reforms by terrorising cross-bench Senators with electoral political threats only serves to put off the day when trade union heavyweights lose the multi-millions of dollars a year they have been sucking out of working Australians’ superannuation savings. Whatever happens to the legislation, we don’t have to wait the year or so before the Hayne Royal Commission into banking and superannuation exposes the extent of the superfund rorts that need fixing; APRA is about to hit superfunds with demands for reform without waiting for the extra powers of compulsion in the stalled legislation. And the new year publication of the Productivity Commission’s review of superannuation competition and efficiency is likely to lead to even further changes for the better.
While Shorten’s union-dominated Labor party will continue to pull out all political stops to sabotage any parliamentary attempts to cut off this river of diverted superannuation savings into their campaign funds, there is no stopping APRA from doing its duty to ensure that ‘the best interests of all super beneficiaries are adequately protected’. This involves ‘essential’ significant prudential changes shortly to be released that are separate from, but complement, the government’s deferred reforms by providing greater transparency, especially around expenditure, in order to lift ‘inadequate standards of practice’. APRA aims to correct the ‘Weakness in the current reporting and disclosure framework for super’ which not only hides the diversion to unions of so many millions of dollars (some estimates put it at $50 million, with ‘political’ advertising taking another $37 million) away from superannuees’ savings, but also ‘makes it difficult for regulators, industry and members of the public to meaningfully compare outcomes across funds, and the many products and investment options they offer’. As reported recently on this page, APRA has admitted that its official statistics on superannuation costs are not to be trusted as ‘expenses are generally understated by superfunds’.
But deferral of the government’s reform package has frustrated APRA’s objective of requiring the appointment of independent directors to represent superfund members, many of whom are involved neither with the employer group nor the union. APRA’s analysis of superfund outcomes indicates that those funds with independent or non-affiliated directors enjoy better results across measures of investment performance, fees and costs and net cash flows. It wants superfund boards to reflect member diversity and expects existing directors lacking necessary skills to quit; ‘some trustees and funds appear insufficiently prepared to manage current and future industry challenges’.
Unlike the predictable claims from the usual suspects, superannuation is no minor financial relation being dragged into the Hayne enquiry as a political stunt to placate the banks and unfairly harass unions and the Labor party; superannuation is as big as the big four banks together, with assets of $2.5 trillion equalling the banks’ total lending. Exposing the hidden conflicts of interest and excessive costs being ripped out of superannuation savings is a more urgent job for the Royal Commission than pursuing the big banks, where the scandals have already been exposed and where the Hayne enquiry’s examination may even result in restoring lost confidence in the integrity of the banking system. Superannuation’s incredible growth has rushed ahead of the capacity of regulators to ensure its integrity, which explains both the major changes that APRA now plans and the need for the inclusion of strong terms of reference on superannuation in the Royal Commission’s charter. For example, it must investigate the use by a superfund of members’ savings for any purpose that is not in their best interests, and determine the adequacy of current laws and government policies, superfunds’ internal systems and forms of self-regulation, including industry codes of conduct. It is also to identify, regulate and address misconduct, to meet community standards and to provide appropriate redress. In opposing it along with the government’s transparency and accountability reforms, what are union-dominated industry superfunds so keen to hide?
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