Super carve-out absolutely ridiculous: Nationals senator

John Williams says a decades old carve-out in laws governing the $2.6 trillion superannuation sector is “amazing”.

Nationals Senator John Williams. Picture: Kym Smith

Nationals senator and key financial services committee member John Williams has described as “amazing” a decades-old carve-out at the heart of the laws governing the nation’s $2.6 trillion superannuation sector — which means super trustees face no penalties for breaking the laws governing them — and called for it to be reversed ­immediately.

Senator Williams, a long-time consumer advocate who led the charge to implement the current royal commission into financial services, said the previously little-known carve-out of super laws was “absolutely ridiculous”, and needed to be fixed with urgency because trustees who had broken the law “deserve to face the ­consequences”.

As reported last month, the Superannuation Industry (Supervision) Act, implemented in 1993, sets out laws governing super trustees, along with penalties for wrongdoing, including “punitive” damages and jail time of up to five years determined by a judge.

However, a secretive 1993 carve-out deep within that act means that those penalties are not actually attached to the laws, meaning super trustees cannot even face a civil fine of any size for breaking the laws under the act.

“If there is a law with no punishment, then that’s a big hole in the whole super scheme,” Senator Williams said yesterday.

“It’s amazing there are laws but no way to punish those who break it. What in the hell is the point of the law?”

In 1993, as the nation was rolling out its compulsory superannuation system under the Keating government, the SIS Act was implemented, containing within it the peculiar carve-out, which consumer advocates say has been exploited by generations of major super fund operators since.

As the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has heard this week, retail, or for-profit, super funds — those operated by the nation’s major banks and financial institutions — have been overwhelmingly responsible for the wrongdoing in the sector.

The big four banks, and financial services giants AMP and IOOF, have each made billions of dollars in profits from collectively managing five million super ­accounts, while the extraction of fees has seen those super ­accounts return almost nothing over the past decade, once inflation is taken into account.

By contrast, super schemes run by ANZ, CBA and NAB for their own employees — well over 100,000 current and former bank employees and their spouses — have achieved returns roughly double that rate over the past decade, with those returns in line with actual market rates.

The returns paid to millions of workers with the major “industry” funds have also seen returns in line with normal market rates.

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