5th Dec 2017

Proposed super changes set to be costly for industry members

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Proposed super changes shelved
Janelle Ward

On Monday, superannuation expert Wilson Sy described the Federal Government’s proposed superannuation legislation as “bizarre”. On Tuesday, the reforms were shelved due to a lack of support from Senate crossbenchers.

The hotly debated changes were aimed at delivering greater transparency across the industry, retail and corporate super funds. They were particularly focused on the industry sector, which allegedly directs funds estimated at about $8 million a year to associated trade unions. These payments currently do not have to be disclosed.

However, the bills were unexpectedly deferred until next year when the Government realised that crossbench support in the Senate had collapsed following strong industry super lobbying.

The Government was seeking three key changes:

  • To ensure all workers can choose their own funds, regardless of enterprise agreements
  • To further disclose how the money of members is spent through new reporting standards
  • To ensure at least one third of directors in industry super boardrooms are “independent”.


 

It is the third point that has drawn strong criticism. Wilson Sy, the principal advisor to Australia’s super system review in 2010 and former head of research at the Australian Prudential Regulation Authority (APRA) which oversees super funds, said industry superannuation funds risked “being looted” under the changes.

This means that employees with funds in industry super would be the big losers given the higher returns from industry funds over the past 20 years. Mr Sy said the bills sought to implement exactly the wrong model.

“The Government is trying to move what has been working, which is the industry fund model according to world’s best practice, to a model that is failing,” he told ABC Radio’s AM Report. “The industry funds have averaged two to three per cent better [than retail funds] over a period of 20 years. Retail funds have delivered about four and a half per cent – about the same as cash. I think it’s looting.

“Retail funds are there to make profits for shareholders. Basically, they treat their members as consumers to [whom] they sell some sort of financial product.”

Over the past five years, a comparison of the average annual returns from the not-for-profit industry funds and for-profit retails funds are more stark – 10.3 per cent compared to 8.2 per cent.

“That’s around $200,000 extra by the time [workers] retire,” according to Matthew Linden from Industry Super Australia.

Currently, industry funds operate under an “equal representation” rule – equal numbers of employer and employee representatives with the latter usually nominated by unions. Under the new legislation, the number of employee or union-nominated trustees would have to be cut.

The Government says: “The reform is important because independent directors bring different skills and expertise, and they can hold other directors accountable for their conduct, particularly in relation to conflicts of interest.”

However, Mr Sy said the bills were ridiculous, and that the independent director requirement, which was already in place at most bank-run funds, had not only failed spectacularly to prevent retirement savings being eroded by excessive fees but had also failed to overcome blatant conflicts of interest.

“If you were a director with most of your super in the funds you were a director of, you’re less likely to allow higher fees to be paid to service providers,” he said.

The Government insists the changes will improve the performance of all funds.“I'm only interested in members and their money and protecting it,” says Financial Services Minister Kelly O'Dwyer.

“As a result of this [lobbying] campaign, funded by the retirement savings of millions of Australians, those Australians have missed out on greater protection of their money.”

Which side of the fence do you sit on?

Opinion: Transparency and good super returns are vital

Should all workers be able to choose which superannuation fund they wish to invest in? Of course they should.

Should super funds be forced to disclose how the money of members is spent? Of course they should.

Should one third of directors in industry super boardrooms be ‘independent’? Sounds reasonable.

But when the key figure in a review of Australia’s superannuation system says something is very wrong with the Federal Government’s proposed changes, he’s worth listening to. And super expert Wilson Sy – principal advisor to Australia’s super system review in 2010 and former head of research at the Australian Prudential Regulation Authority (APRA) – is vehemently opposed to these changes.

My super is in an industry fund. I’m no expert, but it seems to have been doing well over the decades. If there are to be changes – next year when the legislation is belatedly presented after being shelved this week due to industry super lobbying – I’d prefer they didn’t affect the bottom line. For me, and lots of people like me, every dollar counts. A comfortable retirement may be a dream and it is definitely some way off.

The not-for-profit industry funds have been out-performing the for-profit retail funds for decades. Yet it is the retail model we are being dragged towards.

Having half of an industry super board representing my interests seems a better bet than having only one third of the board on-side.

Will the ‘independent’ financial professionals who make up the other two thirds be as concerned about keeping operational costs down to maximise my returns?

Money aside, is there a bigger picture?

Wise heads would no doubt direct me to how industry super funds channel directors’ and other fees back to trade unions, with a proportion – estimated by government sources at $8 million a year – flowing into the Labor Party’s re-election war chest.

The Liberal Government wants greater transparency on this front. Yet Prime Minister Malcolm Turnbull contributed $1.75 million of his own money into last year’s federal campaign.

Will this legislation pass next year?

Similar governance changes to super funds hit a brick wall in the Senate in 2015. And the Labor Party and trade unions are fierce opponents. Watch this space.

Are you in an industry or retail fund? What do you think? 

Related articles
Industry super funds still the best
Govt attacks industry super again
Four tips to protect your super





COMMENTS

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Jim
5th Dec 2017
11:00am
What is your point re Turnbull's contribution to the Liberal re-election campaign, it was certainly transparent everybody knew about it? Re the reported $8 million contribution to the labor party's coffers, this is supposed to be from not for profit super funds, so does that mean the $8 million came out of the members earnings? I would imagine that the majority of union members wouldn't be aware that $8 million of their money was being given to the labor party, and that wouldn't include the contribution from union fees that already go to the labor party, no wonder the union is against transparency into industry super funds, which are union controlled. I certainly agree that industry super funds perform better than other super funds and everything should be done to make sure that continues, keep the banks and insurance companies away is the way to go, but that doesn't mean we should ignore the contributions that are made to any organisations including unions
Knows-a-lot
5th Dec 2017
11:27am
Why the union bashing? We need stronger unions now more than ever! And I hope the ALP romp in at the next election.
Janus
5th Dec 2017
11:55am
A simple matter: ask your fund if it contributes to anything and make a decision. At least they have not taken choice away (yet).

I don't even like Super fund donations to charity or health research stuff, because I can do that myself if I choose to do so, and many charities shouldn't exist if our pathetic governments (both flavours) spent our tax money more socially and equitably.

Personally, I manage my own fund, with provided advice, and am making more in full retirement than I can spend - a bit embarrassing! Every year, I take more out, but there is more in there afterwards. (No I don't need help with this, thanks anyway). What this means is that the profits that funds can make goes to them, but they go to you if you do it yourself.
KSS
5th Dec 2017
12:01pm
I agree Jim. There is a world of difference between Mr Turnbull's personal donation and the regular syphoning of funds from industry super fund to union coffers. Union membership is supposed to voluntary in this country and there are those who choose to join and those who don't. If the union can't manage their affairs on the union fees paid by its members without raiding super of those same members and others who decided unionists not for them, we need and should question their future involvement in industry super funds. It is union membership by stealth currently no wonder they are against exposure.
TREBOR
5th Dec 2017
12:19pm
I agree 100% with Jim and KSS here. I don't see it as the business of a super fund to prop up a political party with money that could and should be more properly directed to the payouts in the future for the members.

Oddly, though, this may be considered an 'investment', but I have a personal issue with funds being directed to policy platforms with which I do not agree, such is evident with Labor at this time and has been for some years past.
Old Man
5th Dec 2017
4:45pm
Knows-a-lot, how is bringing transparency to super funds union bashing? If a union controlled super fund is funnelling money to a political party instead of spreading it amongst members, shouldn't that be looked at? If you think we need a union like the CFMEU then we're in a world of trouble. This is a union which has continually appeared before the courts because of violence against women, physical violence, extortion and secret commissions. They have paid fines totalling more than $10M which comes directly out of members' money.
john
6th Dec 2017
4:06pm
Correct , and to "Knows a Lot," union bashing is caused by the fact that these organisations are secretive and blatantly over rule their rank and file, AND APPEAR TO DO A LOT MORE THINGS THAN PROTECT WORKERS, like gathering massive funds , for what, to buy property ? To buy people?
To, as in Jacksons and Williamsons case fill up their own private coffers?
And I have no idea why one cent would go from rank and file members to a union donation fund then to the ALP whether its through fees or superannuation. No one ever told me my fees went to the ALP!
But my union was as weak as piss.
Forget about the fact that its not declared as an amount , what about THE FACT THAT IT EVEN HAPPENS. since when, and here's the key , It is always here say and unexplained rubbish that spreads word through unions but it is never specific , that is how criminals work, keep the mushrooms in the dark, but with unions its not feed them bullshit , its feed them nothing, under the guise of the visibility of a handful good union people who are actually there for the worker.
I'm retired my work mates tell me my bunch who I rep'd for , they never see, some of them on over a hundred thousand bucks a year as "officers" of the union, and one who got voted out once but still stayed on on a higher than average wage, for about three years. Unions are meant for one thing, solidarity amongst workers, not for political advancement or money making, but that is what goes on. And the only thing to stop this filth and thievery is for a honest strong decent government to get in and not let the Bureaucrats bullshit them into NOT having a deep deep look AGAIN at unions. And at banks , at super, at retirement funds , welshed or stolen ?

Reckon it'll happen, nah the mafia lessons are deeply set in motion!Well that how it seems. There are no decwent people in leadership anywhere now. A benevolent dictator is the only way.
Knows-a-lot
5th Dec 2017
11:25am
The Lieberals are absolutely hopeless. They mismanage the economy and want to steal our super.
Old Geezer
5th Dec 2017
11:38am
Mmm we have reds under the bed again.
Janus
5th Dec 2017
12:03pm
I'm with you, Knows a lot, and if Old Geezer thinks that this is communism, then he has some blinkers on.

The problem with the Liberals is that they forget that Governments are there to provide services, but they think they are there to run a business. They forget that there are many out there who might not have a bed that reds could hide under.

Labor might not do what we need either. When, (not if) they get to power next time, it will be interesting to see how good they really are. We need a mix of compassion and common sense, both of which are quite lacking, in either.
KSS
5th Dec 2017
12:08pm
Seems like the unions are not beyond a bit of alleged theft themselves to the tune of $8m and the super contributors don't even know they are being robbed.

Royal Commission into banks good, probe the unions bad eh??? No wonder they lobbied so hard.
TREBOR
5th Dec 2017
12:24pm
It's not 'probing the unions', KSS - it's probing super funds and where their money is going.

Probes into unions have thus far yielded little more than a single conviction costing hundreds of millions of taxpayer dollars. The fuzz could have done it a lot cheaper.

And don't start on 'Thommo' - his UNION caught him out first... not some jumped-up and blown-up 'commission', and long before that 'commission' was even contemplated.... his antics are just thrown in to pad it out and make it look like that waste of public money (equating to around fifteen years of fund contributions to Labor, BTW) actually did something for its money apart from sling a lot of merde around.
Jim
5th Dec 2017
12:49pm
Knows a lot accuses me above of union bashing, I would like him to show where I am Union bashing, I merely pointed out that it is reported that industry super funds that are largely controlled by unions recieve $8 million in donations to the labor party, there are many people that are in industry super funds tha are not supporters of the labor party, all I have stated is that there should be transparency in super funds and the labor party and the unions are against transparency in industry super funds, but strangely the labor party are calling for transparency in other financial institutions, you hav to wonder what the difference is.
roy
5th Dec 2017
2:35pm
I think we should put Shanghai Sam Dastyari in charge of our super, he would treble our money with the help of his Chinese friends.
Rainey
6th Dec 2017
9:30am
OG is a communist! All his posts suggest people who work and save should be stripped of their savings in old age and given nothing from the state, while the rich party on massive concessions and benefits at taxpayer cost and the poor are given bare sustenance. That, my friends, is COMMUNIMSM. Red as it comes!
ex PS
6th Dec 2017
11:13am
That's not news O.G. most of the RW Acolytes who contribute to this forum spend most of their time looking for and finding Reds Under The Bed.
Old Geezer, have you been hiding under Knows a lots' bed again?
arbee
6th Dec 2017
11:53am
Knows a lot and janus, it is the unions who are stuffing up our economy and stealing your super, not anyone else. Get your red blinkers (or blindfolds) of and then you might see what damage the unions are really doing
libsareliars
6th Dec 2017
3:43pm
I agree with Trebor and Knows a lot. Can't trust the LNP.
Kaz
7th Dec 2017
4:47pm
Industry funds give more to their members. The Libs don't care about those funds members, they want to use the money they make and their hatred of unions stops them from simply supporting workers and being glad that they will access a good super in retirement. They don't give credit where credit is due. Why do they care so much ask yourself truthfully?
pedro the swift
5th Dec 2017
12:01pm
I am all for total transparency in all super fund dealings but I would not welcome these socalled "independent" members of a super board.Who decides if they are independent?
If this gov is wanting to make changes to super I would be very suspicious.
Janus
5th Dec 2017
12:04pm
What??!!! Don't trust our government??? How could you!!
Old Geezer
5th Dec 2017
12:51pm
As soon as they invest in managed funds all transparency is thrown out the window. If you dare to ask then that is knowledge that they are not allowed to disclose.

How much are they paying to unions to run them?
ex PS
6th Dec 2017
11:15am
The only reason this government would want to get mixed up in our Super is so that they can get their grubby little claws on it. If they have to do it through the banks, they will.
Old Geezer
5th Dec 2017
12:10pm
I can't see anything wrong with this legislation myself. If anything it will further protect people's super.
TREBOR
5th Dec 2017
3:45pm
Only the intrusion of so-called 'independents' - meaning hand-picked ideologues and old mates of the LNP, who will naturally 'advise' that the funds should be incorporated into the retail funds, for better control and oversight, and coincidentally to remove a source of funding for the Labor party.

Now, regardless of the virtue of super funds paying any part, to move to remove in such an under-handed ways is wrong, and two wrongs do not make a right.

NEVER trust a politician and always look for the clods in the silver lining.
TREBOR
5th Dec 2017
3:45pm
'paying any party' - sorry.
Old Geezer
5th Dec 2017
3:58pm
Unions just don't like it as they miss out of their 8 million a year and we all know who runs the Labor party.
Rosret
5th Dec 2017
6:31pm
Me either Old Geezer. Seems like a good idea.
ex PS
6th Dec 2017
11:19am
My Super is already protected, by use of a well balanced and capable board consisting of Union, Non-Union, professional and member representatives. Yes it is an Industry Fund and the banks have no part other than providing investment products.
We do not need government interference stuffing up something that is working well.
john
6th Dec 2017
4:14pm
One thing old Geezer, unions are far far from commies, more like slick underworld operators, not all of course , but a sad fact!
Kaz
7th Dec 2017
4:51pm
You've been conned old geezer! Ask more questions. Why? Why? Why?
BundyGil
5th Dec 2017
2:08pm
The LNP government couldnt run a chook raffle, much less a country. The proposed legislation is a futhur illustration of this, grovelling to the banks who's super funds are a total waste of time. The government wants to nobble the highly successful industry super funds so the dodgy bank super funds can compete.
dreamer
6th Dec 2017
5:53pm
was it not a bank that used its employees super about 20-30yrs ago and was told it was legal
floss
5th Dec 2017
2:15pm
Pray tell how can Industry Funds give away $8 million and still return more than Retail funds to their members,think about it before you put the boot into unions . Read your history books and see what life was like before unions, kids seven years of age being killed working in the mines . What a bunch of weak people the so called born to rule mob are .
roy
5th Dec 2017
2:37pm
When you say born to rule, do you mean shifty Shorten?
Jim
5th Dec 2017
3:31pm
I don't understand your comment floss, you do understand that the industry funds are largely controlled by the unions and they are the ones taking $8 million out of the funds and donating it to the labor party, that's why people are concerned, you question how $8 million can taken out of industry super funds and still earn more than retail funds is therefor a good question how indeed!
TREBOR
5th Dec 2017
3:48pm
Hard to figure, isn't it, floss? I can't see that one myself, although it may be that $8m is a drop in the bucket. Like governments, once any organisation begins to deal with huge sums of Other People's Money - there is ALWAYS more where that came from, and the few puny dollars that might otherwise have given old Mrs McGillicuddy the swamp cleaner $20 a fortnight more in retirement are a meaningless sum.

It's a form of sociopathy. Plenty of that going around.
Rae
7th Dec 2017
1:32pm
$8 million is a wee drop compared to 2% of hundreds of billions.
seadog
5th Dec 2017
2:41pm
As an ex Union Member and for that matter a "Shop Steward" I have no problem with asking the question as to how come $8 Million is siphoned off to the Labor party. I do not support them as they are the worst managers of our finances that this country has ever had. KRudd and Gillard are the reason, with the help of Swan, this country has so much debt and the interest rate is spiralling because of them. You supporters of Labor are very blinkered in what you say and obviously think. I thought, incorrectly, that this forum was apolitical but it seems that it is mainly an outlet for left wing blinkered idiots.
roy
5th Dec 2017
2:56pm
So so true, this site needs renaming as the Moscow or Beijing times.
TREBOR
5th Dec 2017
3:49pm
My thoughts and my position exactly, seadog.... Iwas a Union delegate too, and copped a heap from management for it, but just because management and government stink these days doesn't mean a Union super fund should be financing a party.

That is NOT the purpose of that fund.
Kaz
7th Dec 2017
4:54pm
If it ain't broke don't fix it. Industry funds provide more for members.
Rhonny
5th Dec 2017
3:27pm
Manage your own super funds then you take responsibility & you don't pay fees ....simple
TREBOR
5th Dec 2017
3:56pm
If you have sufficient funds to do so.... you could argue that it used to be that way pre-super............. it used to be a kind of rule that you need at least $100k income annually to even consider it.... that would be an outdated figure these days I think, given the current raging real inflation.

Gee - if Gina gets to offshore 300,000 live cattle annually to China, we might need a thousand Reichsmarks to buy a slice of beef....

(heed that warning about the 'global economy. I was chatting to the neighbour's dad yesterday and he said his last cattle sale returned him $3.50 a kilo body weight, as opposed to around $2.40 previously - it doesn't take too much figuring to see that a 45%-odd rise in payment to farmer will expand massively to the end user once it is filtered through processing and then has global 'value added' added) .......
Tib
5th Dec 2017
3:53pm
Only 8 million to unions. That's nothing compared to what the retail funds skim off. You couldn't buy a retail CEO for that. Vote the Liberals out before they steal your money.
TREBOR
5th Dec 2017
3:56pm
Fair point.
Jim
5th Dec 2017
4:47pm
So you think it's ok to steal $8 million from workers super, using the excuse that ceo's from retail funds are reaping vast salaries, do you not think that there should be an enquiry into both lots of thieves? Keeping in mind that the banks including their super fund involvement is due to be looked at but labor with the aid of the cross benchers are preventing the same enquiry looking at union controlled industry super funds, not forgetting that they are taking $8 million that we know about, what is the real cost?
Tib
5th Dec 2017
5:10pm
I think it's better to give unions 8 million to protect OUR interests than give 10 times that much to retail funds to protect THEIR interests.
For all that extra money the retail funds still underperform. Not only are they thieves but they're also bad at their jobs, oh hand on no theyre not they're only there to make profits for themselves, I guess they are good at their jobs but no good to me!
Tib
5th Dec 2017
5:12pm
Jim by the way whatever the real cost of unions I'm still making more with an industry fund than a retail fund so it's still cheaper than the retail funds stealing my money.
Kaz
7th Dec 2017
4:56pm
Good points Tib. The proof is in the pudding.
ex PS
8th Dec 2017
12:11pm
Jim, do think that Financial Super Funds aren't skimming money from members in order to donate the the Coalition? Ban it by all means but ban it for all.
It doesn't matter how you spin it, Industry funds do better and government interference will only stuff it up.
Old Man
5th Dec 2017
4:51pm
I find it passing curious that the proposed legislation has been pulled immediately before a Royal Commission into banks, superannuation funds and insurance providers is announced. If there is something rotten in the state of Denmark, a Royal Commission will find it. As Labor also wants the same Royal Commission, they must accept any recommendation to change the superannuation funds governance by the Royal Commission. Be careful what you wish for.
Kaz
7th Dec 2017
4:59pm
Don't forget we had an enquiry into the unions. Waste of time. Now it's time to look at the big end of town, the scope is widened and the banks control the terms of ref. Cmon people, be more objective - you are meant to get wiser as you age - but only if you become more open.
Anne Ozzie
5th Dec 2017
5:01pm
If the former head of APRA thinks it's a bad thing, then you can be sure it is a bad thing.
Tell the government and private industry to keep their bloody mits off my money. If I had wanted it to go to a private fund I would have put it there. Its only their say so that $8 went in the Labor war chest and even if it did the unions are the only thing between us and government and multinational corporations (which include the banks). Hands off MY super, Mr Turnbull and the rest of the financial sector

Tell me just when was the last time a corrupt Liberal government was actually concerned about anyone but themselves? As far as I am concerned the Liberals couldn't manage a penny toilet let alone the economy or my super!
Jim
5th Dec 2017
5:22pm
Not sure when the last lib government got kicked out because of their corruption, in fact I don't ever recall it happening, but the last labor government in NSW was certainly kicked out because of rampant corruption, and who does dodgy Bill try to bring in, non other than the leader of that corrupt NSW Kristine Kinealey.
roy
5th Dec 2017
5:40pm
Just imagine Shifty Shorten and Shanghai Sam Dastyari in charge of the once lucky country,sheesh.
Kaz
7th Dec 2017
5:01pm
Jim you obviously only read headlines or you wouldn't say what you did. And you're talking state now? Federal is the subject.
john
6th Dec 2017
4:11pm
Old Geezer is calling it communism ha ha ha ha ha ha , its gangsterism of the slickest and sickest order. Secrecy with other peoples money, La Cosa Union.
Rainey
8th Dec 2017
12:01pm
OG has a communist mentality. He demands anyone who isn't able to achieve great wealth should be stripped of all they earn and save in old age and forced to hand back their home and any remaining assets to the government on death, and the poor should be given the barest sustenance only, while the rich should keep taking handouts. That's communism - not in theory, of course, but in practice!
john
6th Dec 2017
4:12pm
Janus ...........HOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOW do you make all that money man???????????
Circum
6th Dec 2017
4:29pm
Many of the comments are about Super funds contributing money to political parties.I agree that that is wrong and should be banned.The 8 million dollar figure talked about is high but small compared to what Super funds siphon off members in non transparent fees.In other words its not obvious from your Super returns.Besides the retail Super Industry is doing the same thing fattening the pockets of fund managers .The system needs changing.Independant directors have done little for retail funds and union reps on non retail funds have resulted in members funds being plundered.
Kaz
7th Dec 2017
5:03pm
Plundered? Whose super funds do better?
ex PS
8th Dec 2017
12:19pm
I have seen how these boards work, I can not figure out how it would be possible for one member to plunder anything, they would have to sway half a dozen other board members. It seems like a fantastic over cook to imply that a Union representative on a board could convince the rest to do something that was against the interests of the members.
The other thing I can't quite get my head around is how the hell this could happen without such action being leaked to the members or the press, just too much about these assertions does not add up.
I know that the Industry Fund I was and still am part of could not make a donation of any significance without talking the proposition to the members for a vote. Could you imagine workers voting to have their contributions towards retirement given to a political party?
dreamer
6th Dec 2017
4:37pm
If we let this go through not that we have any chance against these capitalistic bas....your great gran-kids will hate you for it


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