Big super needs a big inspection

Allegations of shady practices and poor governance levelled at industry superannuation group Cbus raise big questions about how the union-backed superannuation industry has been allowed to escape proper regulation.

The accusations, which are now before the Federal Court, suggest an industry that has grown rich and been allowed to become a law unto itself. Given the rivers of cash flooding into superannuation – now equal to 11 per cent of the nation’s wages bill – this is an extraordinary and untenable situation. Add the involvement of trade unions with links to organised crime and the need for intervention is irresistible.

The Cbus allegations, made by the Australian Securities and Investments Commission to the Federal Court, are of a systemic failing in which death benefits or disability payments were dragged out for as many as 10,000 members, with an estimated $20m lost by claimants. For an industry fund with $94bn under management and 920,000 members, these numbers might seem inconsequential, but not for those involved and their families.

The accusations are on par with the fee-for-no-service scandal that engulfed the big banks and the unconscionable practices that were routine among many investment advisers who put their own profits ahead of customer returns. It is possible that what has been exposed at Cbus will be the tip of the iceberg for industry super. Cbus is already under the spotlight for its relationship with rogue construction union the CFMEU. Industry funds have long had an uncomfortably close relationship with the fraught life and disability insurance sector.
It is an uncomfortable fact that many who sit on the superannuation boards as directors are retired politicians and lifelong union or business delegates. Wayne Swan, the current ALP national secretary and former treasurer, is the chairman of Cbus. Unfortunately for him, the board he leads ignored warnings about the poor state of payments from its own fund administrator.

ASIC deputy chair Sarah Court says the commission is doing a “deep dive surveillance” of super trustees. This is overdue and must extend beyond Cbus to include all industry super funds. With trillions of dollars under management, these funds exert a large influence over financial markets and the post-retirement lives of millions of Australians. They must never be allowed to lose sight of the fact it is the members, not trade unions, political parties or those pushing fashionable environmental agendas, that they are there to serve.