Protecting savers’ interests

New legislation by the Turnbull government that would empower the Australian Prudential Regulation Authority to force superannuation funds to provide detailed disclosure of millions of dollars in hidden annual payments to unions and employer groups deserves the support of all political parties and independent senators. The legislation, drafted by the Minister for Revenue and Financial Services Kelly O’Dwyer, would allow APRA to make corrective orders against any fund that did not act in the best interests of its members. The legislation, as national affairs editor Simon Benson reports today, would also allow APRA to better scrutinise the appointment of board members of super funds and order the removal of directors who were not deemed qualified or to be acting in members’ interests. APRA would also be empowered to apply greater scrutiny and hold funds more accountable for their management of members’ savings, worth $2.3 trillion.

While applicable to all industry, retail and corporate super funds, the new laws would crack down on payments from industry super funds to their associated trade unions. Such income, estimated to be worth more than $8 million a year — mainly in undefined “sponsorships’’ — has become a cash pipeline to the union movement, for use in political campaigning. A small portion of the $8m is derived from union super funds paying directors’ fees to union officials who sit on their boards directly to the unions rather than to the directors. In the past decade, unions have skimmed about $53m in total from super funds.

Last week, The Australian revealed that 47 unions had built a combined political war chest worth $1.5 billion in assets and an estimated $900m a year in income. That is problematic. Trade unions represent just 10.4 per cent of private sector workers and just 35.8 per cent of public sector workers. Yet as their numbers wane they are wielding more influence over Labor Party policy, often to the detriment of profits, jobs and productivity. As some union resources are drawn from workers’ super funds, it makes sense that investors should be able to seek answers about how their contributions are being used and where their money is being invested — rights that will extend to members of all superannuation funds.