Cosy ties between unions and super funds to continue with regulations wound back

While Treasurer Jim Chalmers has been busy warning us of hard times ahead, his assistant has his eyes on your superannuation nest egg, writes Mike O’Connor.

While Federal Treasurer Jim Chalmers has been busy warning us of the hard times to come, his sidekick, Assistant Treasurer Stephen Jones, has been busy eyeing off all that lovely money sitting in your superannuation policy.

Barely had he slid his feet beneath his ministerial desk than Jones was directing Treasury bureaucrats to look at a requirement introduced by the Morrison government for your super fund to act in your best financial interests.

Surely they were already doing this? Well, not really with the Coalition introducing a number of reforms effective from July 1 last year following a finding that Australians were paying too much for their super with fees charged by the funds among the highest in the world and totalling $30 billion a year.

The then government also found members were disadvantaged by a lack of accountability and transparency as to how their money was being spent and that a number of funds were underperforming and costing members millions of dollars of retirement savings in the process.

A single word can make the world of difference and thus the government changed the requirement that funds act in their members’ “best interests” to act in their “best financial interests” with directors liable to be forced to show that they had done so.

Assistant Treasurer Stephen Jones. Picture: NCA NewsWire / Gary Ramage

The Coalition also passed regulations requiring funds to clearly state and itemise payments made to political parties, industrial bodies such as trade unions and money spent on marketing.

Industry super funds and trade unions have long enjoyed a cosy relationship, with funds making payments to unions to encourage workers to become fund members. According to the financial services royal commission, these payments totalled around $30 million of members’ funds in the five years to 2019.

Then there are directors’ fees, which in industry funds flow to the trade unions. These are estimated to currently run at about $14 million a year.

It’s not easy for Mum and Dad to find out if their fund transfers money to unions and virtually impossible to discover their precise nature of the transfers.

Suzanne Smith, Australian Prudential Regulation Authority’s superannuation executive director, told a senate estimates committee hearing that it had “started to dig into this and to look at the analysis. We’ve asked some questions of funds directly to try to help us reconcile these as well as the directors’ fees.”

Finally Mum and Dad might be able to get an idea, thanks to the Coalition’s new regulations, of just how the funds and particularly those with trade union affiliations were spending their hard-earned with concerns raised that rather than being employed in members’ best financial interests, super funds were being used to fund political campaigns.

Minister Jones, who prior to entering parliament was branch secretary and communications division secretary for the Community and Public Sector Union (NSW) from 1993 to 2004, a lawyer for the Australian Council of Trade Unions from 2004 to 2005 and secretary of the Community and Public Sector Union from 2005 to 2010, has other ideas.

He is suggesting that rather than itemise such expenditure, the funds merely provide a total figure which leaves Mum and Dad still sitting around the kitchen table scratching their heads and wondering where their money went.

One of the best changes made by the Coalition was a requirement for each of the 80 default funds in MySuper to have its performance over the past seven years measured against the overall performance of the share market, with the duds, 13 of them, forced to write to their members suggesting they find a better deal.

A lot of us have a ”set and forget” attitude to super. When you’re young, you don’t worry about it because you know that you are never going to get old. By the time it dawns on you that retirement is looming, you may have missed out on hundreds of thousands of dollars of potential super income thanks to the underperformance of your fund.

A wake-up letter, then, could have a significant impact on your later years.

Minister Jones is not so sure and has halted the planned extension of the grading test to include non-default funds which would have exposed the performance or lack of it to members of all the funds in the country.

In a recent post on Twitter, Minister Jones exclaimed that “it’s great to be part of a government that’s firmly focused on delivering transparency and accountability.”

We will see. By their actions, you will know them.