Super members must come first

Australia’s total superannuation assets passed $3 trillion at the end of last year as the nation’s giant pool of savings grew steadily, despite a wave of COVID-19-related withdrawals in the past 12 months. While all working Australians have a stake in the sector, many people find it confusing, especially when changes are afoot. Based on past experience, some people worry for good reason about fee gouging and poor returns. The Morrison government’s Your Future, Your Super package, scheduled to come into effect on July 1, has worthy objectives. As Josh Frydenberg and Superannuation Minister Jane Hume said recently, the reforms are about reducing waste, holding underperforming funds to account, limiting multiple accounts that cost workers in fees and strengthening protections around the retirement savings of millions of Australians. Such issues need addressing and the reforms are designed to save workers $17.9bn across 10 years.

That said, the Coalition is under pressure from unions and employers to make significant changes to its proposed superannuation bill. As Ewin Hannan reported on Monday, ACTU president Michele O’Neil and Australian Industry Group chief executive Innes Willox said in a joint letter to crossbenchers that they feared the bill would lock more fund members into poor-performing products “potentially for life”. Such concerns need to be clarified by the government. Ms O’Neil and Mr Willox also are concerned about the legislation creating the power for the responsible government minister to cancel investments on the basis of members’ best financial interests. The issue of a minister blocking particular investments also was raised last week by Ian Silk, chief executive of AustralianSuper, the nation’s largest industry fund, which has $200bn of funds under management. “Can you imagine a government saying we don’t like a super fund investment in (a) coal-fired power station or, on the other side, maybe solar-powered?’’ Mr Silk told Ticky Fullerton. “Funds have a fiduciary duty to act in the best financial interest of their members. It just seems regulatory overreach to have the government able to put their hands into a fund’s investment portfolio and direct the fund not to proceed with an investment.”

Governments do not always pick winners in deciding on investment strategies. And a future deep-green government may be inclined to force funds to scrap investments in fossil fuels or pipelines, for example, on the basis of ideology rather than returns. As wheeling and dealing intensify, crossbenchers and the government must secure the best system for workers to maximise their savings and reduce dependence on the Age Pension.