Ian Silk sails through banking royal commission’s super grilling

Since the establishment of the inquiry, the Coalition has been waiting to see strips torn off some of the largest industry funds.

Ian Silk leaves the banking royal commission in Melbourne yesterday. Picture: Aaron Francis

The government’s hopes that the ­financial services royal commission would deliver a public shellacking of potentially misspent superannuation money by the union and employer-backed ­industry fund lobby group have stumbled at the first hurdle, after AustralianSuper chief executive Ian Silk sailed through his examination yesterday.

Mr Silk, who heads the country’s largest superannuation fund, the $140 billion AustralianSuper, was the first chief executive of a major financial institution to sit in the witness box at the royal commission.

His evidence followed four days of gruelling testimony from two National Australia Bank executives, who dodged questions on the bank’s excessively casual response to its gouging of super customers with fees charged for little or no service.

Mr Silk faced examination by counsel assisting the commission, Michael Hodge QC, over the group’s funding of a controversial “fox and henhouse” advertisement attacking banks for wanting to get their hands on Australia’s retirement savings. He was also questioned on a $2 million payment made to set up online news site The New Daily.

In a two-hour session in the stand, Mr Silk was asked about the fund’s treatment of members invested in “cash” options and the lengthy tenure of some board members, including chairwoman and former AI Group CEO Heather Ridout.

Since the establishment of Kenneth Hayne’s inquiry in November, members of the Coalition have been waiting to see strips torn off some of the largest industry funds for funding marketing material seen to be at odds with the government’s reform agenda.

However, the opportunity allowed Mr Silk to contrast his fund’s actions with the damaging testimony NAB executives earlier put forward detailing their $87m rip-off in fees provided for no service, and the bank’s response, which has led to possible criminal breaches of the law.

“The difference between the best funds and the poorest funds is literally life-changing for a lot of people,” Mr Silk said.

Mr Silk told of the fund’s ­immediate overhaul of its cash options, after the prudential regulator in recent weeks wrote to all funds in the country about concerns relating to cash options that may also include some investments in non-cash instruments.

AustralianSuper reduced its non-cash instruments from 1.83 per cent of the option to zero per cent, he said.

He said that while a three-year term limit on director tenures currently exempted long-serving members including Ms Ridout, Dave Oliver, Innes Willox and Brian Daley, the fund was now reviewing whether to extend the term limits to these directors, a move endorsed by a unanimous board decision. The fund’s payment of $2.3m to set up The New Daily, a website eventually sold to the jointly owned Industry Super Holdings vehicle, of which AustralianSuper is also a shareholder, was paid out of the fund’s $1.50-per-week membership fee, which goes towards administration and marketing.

That cost worked out to about 20c a year for each of AustralianSuper’s 2.2 million members, but Mr Silk said the payment was ­“serious money in anybody’s language for a member-focused organisation and we don’t splash money around lightly”.

His comments were backed by board documents and research, some of which was shown to the royal commission.

While The New Daily was never included in the fund’s investment portfolio and did not return a financial dividend to the fund, its shareholding in Industry Super Holdings had been “written up” by 30 per cent over the past year, he said.

The fox and henhouse ad, which Mr Silk said was “squarely directed” at crossbench senators and politicians, was made with the intention to derail government legislation aimed at reforming the superannuation system. Parts of the reform bills were aimed at breaking the selection of super funds from the enterprise bargaining agreement system, which benefits industry funds. Other parts dealt with increasing powers for the regulator and a requirement to put more independent ­directors on fund boards.

Mr Silk said the proposed changes could lead to members of AustralianSuper moving to a bank-run retail fund and “suffering a corresponding financial loss” or lead to a decrease in new members joining the fund, which could jeopardise the retirement incomes of members of the fund.

Mr Hayne said there was an open question whether “political communication directed to what are the perceived interests of present or future members” either “is not or cannot ever be in the best interests of members”.