Super funds need one guiding principle: members come first

When Labor was banging on about the need for a royal commission into the banks, there is no doubt its pol­iticians did not support super­annuation coming within its scope.

But it was perfectly reasonable for the government to include superannuation within the purview of an ­investigation into the financial services industry. After all, the ­assets under management held within super are extremely substantial — about $2.6 trillion and rising — and superannuation forms an important part of ­people’s retirement incomes.

There is plenty to find out about the superannuation industry, given its lack of transparency and its refusal to come clean with information related to fees and charges, in particular. It is about time the industry super funds and the retail funds stopped their bickering and started to act as they are required to under the law — to maximise the retirement incomes of the members.

The royal commission’s examination of whether super funds ­always meet this sole purpose test will be fascinating. It’s the job of the Australian Prudential Regulation Authority to ensure this test is being met but it really has been asleep at the wheel.

Take the case of the investment in the online newspaper, The New Daily, by several industry super funds. In what possible way does this investment, which has run to many millions of dollars, contribute to the retirement incomes of members?

Telling members that the money for this investment has been sourced from administrative fees rather than members’ ­accounts is no excuse. Members pay compulsory administrative fees to cover necessary costs to service members’ accounts, not to indulge the favoured follies of the trustees. The fact The New Daily runs propaganda pieces for the ­industry super fund sector is no rationale.

The royal commission will also do some needed digging around on the issue of related party interests and whether members get good value for these arrangements. This issue applies to both retail and industry super funds.

The fact is that there are some serious flaws in the way our system of compulsory superannuation ­operates. Those with low balance accounts, those with ­multiple accounts, those in dud funds and those who are conscripted into insurance products they don’t want or need are ­seriously penalised by the way the system works.

It’s time the superannuation industry lifted its game for the benefit of the members rather than simply providing comfortable sinecures for the trustees, many of whom lack the necessary qualifications, and unwarranted returns to the banks.