Superannuation Funds Must Disclose Payments To Founders, Backers, Directors

Just how much of Australia’s industry superannuation money is going to the employer and union backers of these funds?

The Minister for Revenue and Financial Services Kelly O’Dwyer says that over the last decade at least $53 million of member funds is known to have found its way into the pockets of the ACTU but the figure could be much greater.

When the superannuation movement was started Paul Keating made sure that the employer bodies were equal participants with the unions so whatever the unions receive you can almost certainly double that figure.

So we could be looking at least $100 million leaving members funds to support the backers of the industry superannuation fund movement. But conceivably the figure could be many times that particularly when you include all sorts of side deals that can infiltrate such movements. Alternatively money leaving the industry superannuation fund movement might be entirely reasonable and justified by real and essential services provided at market rates.

The problem is we do not know and the fanaticism that industry superannuation fund movement, the unions and other groups are showing in opposing the government’s legislation to enforce transparency makes me think that the funds and their directors have a lot to hide. If I was a director of an industry superannuation fund that was not hosing money at employer and union groups I would want the world to know that the fund where I was serving was absolutely clean. I would look to total transparency to end the debate.

Let’s hope my fears that the industry superannuation funds’ opposition to total transparency indicates they are hiding bad practices is misplaced.

Surely it is in the national interest that all superannuation funds disclose payments to their founders, backers and directors. Most members will not bother to look but the financial community including journalists and politicians will examine the disclosures and make sure everybody knows if bad practices are taking place.

So I would ask the crossbenchers when they look at the superannuation fund legislation to remember that both the ALP and the Greens are in the pocket of the unions and will vote in accordance with union instructions on matters like this.

There is no way that full transparency of all amounts paid will damage the superannuation movement if it is clean. Indeed if there are no bad practices it will greatly enhance the strength of the industry fund movement.

One of Australia’s leading actuaries Allen Truslove took a major role in the Coles enterprise agreement to make sure that Coles employees would have a choice of superannuation funds because he realised there was a racket going on whereby retail employees who worked for different industries often had many funds and were being levied fees multiple times which was destroying their returns. He stopped the racket at Coles and hopefully that will spread through the retail sector. Freedom of fund choice is also included in the O’Dwyer proposed legislation.

Once again there should be no reason why employees should be slugged with multiple fees to prevent superannuation becoming an important part of their savings. It is just wrong.

But once again it is being opposed by people who should know a lot better and once again that sort of irrational opposition makes you fear that something wrong is being hidden. Certainly that appears to have been Truslove’s view.

The government wants to change the board structures of the funds. I think that’s a secondary issue, particularly as most industry funds are currently performing well. If fund X is shown to be siphoning money into employer or union backers then the community outrage will force directors to leave. And bad practice includes paying employers or unions for director services. Directors represent members not employers or unions.

If revelation of bad practices doesn’t force directors out we can then bring in the legislation. If fund X is performing well and absolute transparency shows it behaves well then why should good directors be removed? Transparency is the key.

Back some seven years ago the Institute of Public Affairs singled out the giant Californian pension fund CalPERS as a model of disclosure for a superannuation fund. Members could see what directors were paid, any commission deals, assets which were being bought and sold and a raft of other matters. As it happened there was a scandal that emerged but it got discovered quickly because of the disclosure. Had there not been disclosure those rackets might have greatly damaged the Californian fund.

All those involved should remember that we are not talking about government money, employer money or union money but rather the savings of ordinary Australians. It is their money and they are entitled to know where it is being spent. Industry funds have done well because they are major investors in property which has risen in value. They get full marks for this. And some of them disclose a lot of material but if nothing is wrong there is nothing to fear from full disclosures. And every time you hear a Labor or Greens politician saying industry funds should be secret societies you know that there is risk that they are concealing something bad.

By Robert Gottliebsen

The Australian

17 November 2017

Recent Posts

See All

ASIC Should Withdraw Its SMSF Factsheet

The Australian Securities and Investments Commission (ASIC) should withdraw its Self-Managed Superannuation Fund (SMSF) factsheet because it contains “an array of seemingly deliberate inaccuracies”, a

SMSFA Points To ASIC Fact Sheet Inconsistencies

The SMSF Association has criticised the corporate regulator’s focus on the risks of SMSFs in its mailout campaign targeting new trustees, saying the data sources used in its fact sheet are inconsisten