ISA warns government off super change

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Industry superfunds are unimpressed with the Treasury’s proposed changes to increase compliance and transparency in superfund governance, warning the government to “take care” before it makes another step.

Assistant Treasurer Arthur Sinodinos, who released the white paper on Wednesday, called for feedback on opening up competition and increasing transparency of super funds ahead of possible legislation and regulation.

The discussion paper addresses fund governance, and promotes the idea of independent trustees rather than an equal number of employer and employee representatives.

But Industry Super Australia (ISA) is not happy at proposals to appoint independent directors to their boards, saying it will fundamentally change the board composition of the industry’s “best performing” super funds.

ISA say funds which have the representative trustee structure benefit members, citing APRA research which shows they have outperformed retail super funds over the past 16 years by an average of 2.3% per year.

“The representative trustee system is a feature of retirement systems globally and in Australia has delivered fund members superior net returns over the long term, when compared to retail super funds typically run by banks,” ISA chief executive David Whiteley said.

“Representative trustee board composition is not homogenous with many funds having independent directors or chairs.” 

The discussion paper canvassed whether super fund directors should be subject to regular performance appraisals, and have their terms capped. 

The Government is also proposing to make changes to the way that workplace default funds are selected, in order to improve transparency and competition.

A 2012 report by the Productivity Commission estimated between $6 billion and $9 billion in super contributions were made to default funds – funds for members who do not choose their own.

Under the current arrangements, employers can select a workplace default fund from a list of up to 15. But ISA say few employers will have the time or expertise to select a default fund for their employees from the expected 100 MySuper options.

“Default superannuation funds have a critical role in ensuring the super system delivers to members who are not engaged with their super. It is absolutely critical that only the best performing funds make the cut,” said Whiteley.

“Industry SuperFunds are concerned that these proposals will remove an important merit based process which is transparent, independent and places a premium on member returns.”

He warned the government to “take care” before implementing changes.

Submissions on the white paper are due 12 February.


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  • Innocent Observer on 29/11/2013 12:48:36 PM

    ISA makes a very good point that most employers (and most employees) don't have sufficient knowledge about investment strategy or the superannuation system to make an intelligent and fully informed decision when selecting "default" super funds/investment options.

    And this isn't a judgement on the intelligence of the employer or employee, just a statement of fact when we are talking about something as specific as investment strategy and what is widely considered to be an overly complex and rapidly changing superannuation system. Just as I would be ill-qualified to provide advice on something I know little or nothing about, most employers are having a crack but getting it wrong. ISA is not helping through their relentless demonisation of "advice".

    I believe the best solution would be a government-underwritten Defined Benefit scheme, returns linked to CPI plus margin (say CPI+3%), with the sum convertible to a tax-free annuity at retirement. In the meantime use the $$$ for infrastructure etc.... But anyway, there I go daydreaming again....

    As for the ISA's other comments suggesting that a Board representative of members (as opposed to independent members) somehow correlates to better performance is more than a bit stupid. They should call it for what it is: cronyism. If they truly did have the sole purpose of serving their members surely they would do more to work with the industry, and would pursue sensible strategies like stocking their Boards with unbiased experts. I don't know about you, but if I want expert advice on how to build a house I'll ask a builder, not an asset consultant. I'm pretty sure most carpenters would take a similar view when it comes to managing their finances.

    The ISA has seemingly built their business around trying to discredit the value of advice and weaving this angle into every statement/marketing pitch. It's a damn shame because some of what they do and say is actually pretty good.

    Given the tidal wave of retirees on the horizon (and ISA's very poor record of retaining these clients when they seek retirement advice) you would think they would approach this industry relationship smarter, and less aggressively. Anyway, just a thought....

  • James Smith on 29/11/2013 11:46:16 AM

    ISA keeps referring to 'research' that supports industry fund outperformance to claim a higher moral ground. A detailed analysis of the assumptions made in this research is long overdue.

  • Craig Yates on 29/11/2013 11:06:18 AM

    The real reason why "Mr Superman", David Whiteley is "warning" the government to take care is that the appointment of independent directors to the boards of industry super funds will have an impact on the heavily union and ex-Labor government politician stacked boards that currently exist.Just look at the board line up of AustralianSuper on their website, including the Alternate Member Directors to appreciate the role that current and ex-union officials play in the decision making of this particular fund alone.
    As I have previously stated, unions are about control and the trustees of super funds are about control of members money.Put the two together and you have a formidable force, which quite obviously does not wish to be interrupted by independent people who may have a differing ethos.
    I think it is high time that there is a significant increase in the transparency, accountability and independence of the Industry Super Fund Trustees, just look at the process of transparency surrounding the big spend of member funds on The New Daily project.
    The only warning that "Mr. Superman" , David Whiteley need to be concerned about is how close he is prepared to get to the piece of Kryptonite as it may drain all his super powers and render him useless in his fight against evil.

  • carl on 29/11/2013 10:42:24 AM

    How long have we had to wait for the likes of Whiteley to be told rather than doing the telling.
    Good on ya, Senator. Whiteley is squealing for a reason, I wonder which reason he objects to most!

  • Investor on 29/11/2013 10:20:50 AM

    lets ask a 8 year old school kid how to run super, because that is the mentality of the people from the ISA.

  • Investor on 29/11/2013 10:18:28 AM

    Who cares what these little jumped up morons think! Im sick of them being reported as anything but the dregs from the worst government in the history of Australia. That includes Whitlam's government. Now thats a very low hurdle.

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