Tuesday, October 8, 2013

Industry superannuation funds bracing for gov't battle over trade union influence

Industry superannuation funds are preparing to a fight government proposal to reduce the influence of trade unions on boards that manage retirement savings.

The government is considering a change to the current 50-50 arrangement, where boards positions are split between employer and employee representatives who are tied to unions.

AUDIO: Industry funds brace for Govt stoush on union (AM)

The Coalition is looking at a three-way split to dilute the role of unions and provide more room for independent directors, who tend to be closer to retail funds.

But the chief executive of Industry Super Australia, David Whiteley, says there is no room for political ideology when it comes to delivering super returns.

"We've had several years now of significant change, regulatory change and changes to the taxation system of super, and I think consensus within the community is very much that a period of stability and certainty would be welcomed by some members," he said.

"And I think that applies to both regulatory governance and taxation elements of superannuation."

Prime Minister Tony Abbott said during the election campaign that he would not support any detrimental changes to super.

And Mr Whitely expects Mr Abbott to fulfil that promise.

"I think that the Government will obviously be cautious and consultative in looking at any changes they will be making to the governance arrangements of any superannuation fund and, of course, be very careful and very circumspect in looking at governance changes which might reduce member return," he said.

But he says there is little evidence to show that unions have too much influence on the boards of industry super funds.

"Industry super funds are jointly governed by employer associations and by unions," he said.

"They're a function of consensus and, in fact, in many respects, could be regarded as a very consistent and enduring consensus over the last 20 years."

Mr Whitely warns against any politicisation of super fund boards.

"The most important thing that any government has got in mind will be: what are the long-term net returns to members?" he said.

"The industry super funds, according to the latest data that I've seen, have shown that they've outperformed the retail fund sector, over one, three, five, seven and 10-years.

"So what would be front-of-mind for any government would be making sure that the changes they make are beneficial to members' long-term net returns."

The Cooper Review into superannuation in 2010 recommended more independent directors on the boards of industry super funds.

Mr Whitley says it is unclear whether that would be the case.

"It's hypothetical, of course," he said.

"I think one thing that is clear is that the governance of industry super funds has been central to their outperformance."

"There's a number of reasons for that, of course. One has been the preparedness to invest directly in infrastructure. One has been that industry super funds do not pay sales commission to financial planners.

"But of course, also it has been the governance of those funds themselves and this is something which there has been numerous reports about, numerous evidence presented about, both in Australia and overseas."

Mr Whitey expects to be consulted about any changes to superannuation fund boards.

"I mean, our expectation would be that any government which was seeking to introduce significant change to any part of our industry would be consulting with industry super funds," he said.

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