New super laws set up new political clash

Abbott government reforms aimed at forcing industry superannuation funds to have more independent directors have been slammed by unions as another attack on them.


The reforms put the government on track for a major fight with unions and the 15 not-for-profit, low fee industry super funds that deliver the best returns.

However finance sector and consumer groups welcomed the changes to Australia’s $2 trillion super industry for putting consumers first in an ageing population.

The new laws would require super funds – excluding self-managed funds – to have at least one-third independent directors on their boards and an independent chairman.

Union and employer representatives would have to make way for new board members.

The fees directors on union-backed funds earn flow back to unions and the Labor party as well as to employers.

Unions NSW secretary Mark Lennon said the industry super fund model had been categorically proven in myriad studies to have delivered superior returns to workers for three decades.

“The Abbott government is so obsessed with tearing into unions, that they are even willing to risk the retirement savings of millions of Australian workers,” Mr Lennon said.

“The trustee governance structure, which shares board positions equally between employer and employee representatives, has been proven as the most effective model in Australian superannuation.”

Assistant Treasurer Josh Frydenberg said the new rules around boards were consistent with what sharemarket-listed companies complied with and in line with the 2010 Labor-commissioned Cooper report’s recommendations.

But umbrella group Industry Super Australia said it was being targeted when the focus should be on governance problems it had avoided – the consumer losses and scandals that had engulfed banks and wealth managers.

“It is astounding that anyone would be seeking to interfere with the governance model of the all profits to members super funds that have driven two decades of strong returns,” Industry Super Australia deputy chief executive Robbie Campo said.

“Nearly two per cent higher than for-profit funds.”

Industry super does have an advantage as default funds for many workers, guaranteeing them liquidity.

Labor and the Greens are expected to oppose the changes, meaning the support of crossbenchers will be needed.

Opposition leader Bill Shorten said Labor would consider the proposal but accused the government of putting politics ahead of a case for changing a system already working well.

The majority of sector groups including the Financial Services Council and Association of Superannuation Funds of Australia, as well as consumer advocacy group Choice back the proposed rules.

“As superannuation grows from $2 trillion today to $7 trillion by 2035, good governance will be imperative for protecting consumers from potential conflicts of interest that may arise on boards of superannuation funds,” FSC chief executive Sally Loane said.