Minister for Superannuation Jane Hume (Image: AAP/Mick Tsikas)

The Morrison government’s latest attack in industry super, its Your Future, Your Super reforms, has suffered some major blows.

In April, point woman on the attack, Superannuation Minister Jane Hume, was forced to abandon the most blatantly targeted aspect: the omission of administration fees from the planned fund benchmarking tool (a U-turn hilariously spun by government stenographers as a triumph for consumers).

Then last week, simply to secure passage through the House of Representatives, Treasurer Josh Frydenberg caved in on the other primary mechanism designed to target industry funds: a personal power of veto over super investments.

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This would have enabled a Liberal treasurer to prevent super funds from investing in renewable energy, or advertising their products, or funding research into their investments. Frydenberg’s proposed power of veto had drawn even the government’s traditional allies out into open opposition — even if they were dismissed by Hume as “vested interests”.

The bills form part of a broader attack on super funds and the rights of investors. Frydenberg is also seeking to push through extraordinary limits on free speech for proxy advisers and investors to reduce the capacity of institutional investors to obtain information analysing companies, as well as watering-down continuous disclosure laws and trying to limit class actions.

Throw in that ASIC has been directed to ditch its “litigate first” regulatory approach and adopt a business-friendly “pro-recovery” stance, and it’s clear the Coalition has, very blatantly, aligned itself with the interests of company boards and executives — who make the decisions to donate to them — and against investors (and free speech).

The super bill has now limped to the Senate, minus its two big guns designed to pummel industry super into submission. But the proposed legislation remains remarkably skewed towards the interests of underperforming retail funds.

The annual performance benchmarking test to which funds will be subjected, and the new YourSuper comparison tool that will be established to enable consumers to compare the performance of different funds, will be limited to (mainly industry super-run) MySuper products. Fully one-third of all super funds (other than self-managed super funds), in so-called choice products, will be excluded from the test and YourSuper — products mainly run by retail funds.

That’s contrary to the recommendations of the Productivity Commission, which the government invokes as the basis for the whole reform package. In its 2018 superannuation report, it explicitly said all super products should be subject to a comparison tool, despite the arguments of retail funds operators like IOOF, BT and MLC.

“The commission’s view is that all products should be required to have one-page dashboards, with exceptions only granted on the basis of evidence under the principle of ‘if not, why not’,” it said.

This view was reinforced by the fact that these “choice” products in many cases underperform MySuper products; the Hayne royal commission examined the case of one AMP product that generated a negative return on a cash product.

Another 22% of super monies covered by what are called “multisector choice” products –another lower performing sub-sector — would eventually be subject to annual performance testing, but would not be covered by the online comparison tool either.

There’s also something peculiar about the way the government has gone about “stapling” members to super funds, with the purported intention of preventing the proliferation of super accounts as workers move to different jobs and ensuring new employers do not direct super payments into other default funds rather than the worker’s preferred fund.

By implementing stapling and performance benchmarking side by side, the government ensures that a huge proportion of workers will be stapled to their existing, underperforming fund, most likely run by a retail fund, rather than waiting for underperformers to be weeded out.

The government bill also ignores the Productivity Commission’s recommendation that underperforming funds — again, most likely to be retail funds — be wound up and members transferred to better performers.

It’s almost as if, whenever there was a judgment to be made about whether to look after retail funds or look after their members, the government came down on the side of the former, not the latter.

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Peter Fray
Peter Fray
Editor-in-chief
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