Jan 11, 2017

The next stoush on superannuation is coming

The next fight over superannuation will be over the awards system and the way workers are put into a super fund by default. The big banks want in.

Bernard Keane — Politics editor

Bernard Keane

Politics editor

Despite its poor track record of trying to go after the industry superannuation sector, the government is looking at another tactic to boost big bank-controlled retail super, via the awards system.

Currently, workers who do not nominate a superannuation fund when joining a new employer — which is most of us — are placed by their employers into a default fund identified in the relevant award. The majority of those default funds tend to be, for legacy reasons, either industry super funds (operated jointly by employer groups and unions) or AMP funds, and generally perform better than retail super funds.

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12 thoughts on “The next stoush on superannuation is coming

  1. Alan

    I wish these aholes would leave my super alone!

  2. Will

    The poorer performance of retail super funds is mostly owed to their extravagant management fees. And industry super management fess are only slightly less outrageous. These fees are what need to be regulated. Capping management fees at fund sustenance-only levels would then remove any incentive for poor performing super funds to exist. But to what extent any of this will matter much as we continue to boldly march into the gig economy future of independent freelancers (newsflash: with no super payable) is perhaps the more urgent question.

  3. Dog's Breakfast

    The last great bucket of money that the banks haven’t got their hands all over, and they are drooling at the prospect of doing over so many more uninformed people. The fees are ridiculous and the performance execrable.

    Thank Labor that the industry funds were set up in the first place. As it is, this must be the least efficient sector in the economy, and has significant long term implications.

    1. bushby jane

      I thought that the banks actually have the biggest super funds, along with AMP.

      1. Dog's Breakfast

        Hi Jane, yes they have a few very big funds, but the industry funds suck out huge amounts of money that the banks want their hands on. I’m not aware of the figures, but the industry funds must make up a substantial percentage of all super, probably larger than 50%. Worst of all, the industry funds are run for their members, profits go back into the fund (non-profit!). That is probably what the banks and insurance companies, and the LNP, hate most of all. It’s a phenomenal gravy train, and I’m not saying the industry funds couldn’t be more efficiently run, but at least they have the interests of members at their very core. As Lee says below, superannuation should be designated not-f0r-profit, like charities, and should be the case for education, health, lots of things too important to be left to the profit motive.

  4. Paul Munro

    It is disappointing to see that there continues to be such dissembling about the true nature of the interests that are in conflict over occupational superannuation. From the inception of industrial award provision for compulsory employer contribution to superannuation funds there was a scramble by finance industry players to get a stake in the investment and control of the monies to be paid into funds. Generally, the so-called industry funds, established with employer and union representation on the board of trustees, won out and were given additional support through provisions in awards and industrial instruments for those funds to be also default funds if employees made no election for any of the particular funds allowed by the award. Even so, there were not a few instances where smaller employers managed to hang out and effectively determine a “retail fund” often run by AMP as the fund to which directly or by default, contributions on employee’s behalf would be paid. There is evidence available that a number of such arrangements benefitted the employer at the expense of the employee; kickbacks to employers, dud insurance provisions, slack administrative follow-up on compliance, higher admin costs for the employee; and perhaps, as a commission agent’s sweetener, beneficial access to the finance entity for the employer’s own providential investments.
    Over time, despite some exceptions, the industry funds established a fair degree of ascendancy over retail competitors: they had substantial investment portfolios, they operated with lower management fees, their relatively larger fund size enabled greater strategic investment stability than smaller retail funds less able to avoid immediate market volatilities.
    It is that positional advantage of the industry funds that the Coalition and its finance industry supporters wish to disrupt by enlarging employer voice in the choice of default funds for employees. In the discussions, I see almost no reference to the damage likely to be done to the existing industry funds if the Coalition and its allies find a way to divert ongoing contributions for new employees into retail funds. One important consideration is that the major industry funds are likely to lose the benefit of the significant cash flow from new and continuing employees; it is a truism of trust governance that the existence and size of that cash flow can be a major factor in ensuring longer term stability in investment dispositions. The lower admin costs of industry funds achieved through the not-for-profit orientation and fund size is another consideration that seems if not ignored, to be understated. And finally, who is it who can assert that there will not be employers and fund providers who resort to conduct of the kind for which banks have made themselves notorious, designed to serve the interests of the employer or the banks’ shareholders rather than that of the beneficiaries of funds administered?
    You should smell a rat when the finance sector is so anxious to fix a system that is not broken. For whose advantage is the demand made for more so called competition?

    1. CML

      Very good comment, Paul.
      Now for the Royal Commission into ALL banking activities, including superannuation!

  5. Lee Tinson

    Suggestion for the banks: instead of rent-seeking (which is all this is), why not try to actually compete? Or get out of the business, just like you should get out of insurance. Banks are essentially the usurers, the Shylocks, who always unfortunately exist. Let them stick to that.

    Superannuation funds should be not-for-profit, with ALL earnings (after costs) going to the contributors. This is not an activity for banks. In fact, banks should be excluded by law from operating in the superannuation industry, as should insurance companies.

  6. old greybearded one

    Yes, I saw the results in the agriculture sector up close and personal. Competing with subsidised products and orchardists pulling up trees because they couldn’t compete with fruit picked by illegal migrants in the US, or just plain dumped by Brazil. Of course of you were an ethanol producer in Manildra you got you own free ride. I have only one comment for the FSC. F*** off. You have robbed the customers in just about every enterprise you have meddled in, no more free kicks.


    Given the proven superior performance of industry super funds — money put in customers hands — it is a wonder the questions being asked are not about why any adviser/employer would choose less well performing ‘bank funds’ that does not go close to matching the performance of industry funds. Why does the coalition have a fixation about promoting bank super funds that are ‘no good’.

    1. Will

      Why does the coalition have a fixation about promoting bank super funds that are ‘no good’?

      Because you can’t buy shares in an industry fund.

  8. MAC TEZ

    F.S.C. aka F-wits Stealing the Cream ?

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