The Government has introduced Bills to enact its super fund governance and accountability policies to the Senate, before the House of Representatives, restarting a battle between industry and retail super fund.
The Government introduced the Bills directly to the Senate, instead of to the House of Reps. Minister for Revenue and Financial Services, Kelly O’Dwyer, meanwhile introduced a Bill to the House to expand choice of super fund and close the Super Guarantee salary sacrifice loophole.
The Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017, if passed, would require large superannuation funds to have at least one-third independent directors and an independent chair, with a three year transition period.
This change to the governance of super funds was included in a previous Bill, the Superannuation Legislation Amendment (Trustee Governance) Bill 2015, which passed the House and was debated in the Senate. However it encountered resistance and lapsed when Parliament was prorogued ahead of the last Federal election and was not reintroduced, despite still being Government policy.
The Financial System Inquiry, which was set up by the Coalition Government, had recommended a majority of independent directors for public offer superannuation funds. However this recommendation was rejected by the Government, which instead went with one-third independent directors – which was a recommendation of the, Labor-initiated, Cooper Review.
The Explanatory Memorandum to the Bill says: “This reform is important because independent directors bring different skills and expertise and they can hold other directors accountable for their conduct, particularly in relation to conflicts of interest.”
“The equal representation rule, under which some superannuation trustee boards are either required to or can elect to be comprised solely of employer and member representatives, with no independent directors, has not changed significantly since the introduction of compulsory superannuation in 1992.”
The Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 would enact several of the Government superannuation transparency and accountability policies. This includes improved disclosure and reporting of how super funds spend money, increased powers for APRA, strengthening the MySuper system and annual members’ meetings.
Minister O’Dwyer said: “The comprehensive package will deliver a strong and modern superannuation system that is solely focused on delivering outcomes for all Australians who rely on these funds to secure their retirement, with a strong prudential regulator.”
“Superannuation belongs to members and no one else. The Turnbull Government doesn’t just say we have workers’ backs. Our actions prove it.”
A number of these changes are likely to prove contentious and be hotly debated, both in and outside the Parliament – in particular the governance changes.
Industry Super Australia, which has been campaigning against the governance and disclosure changes, says the Government should prioritise other, more pressing, superannuation issues.
“Industry Super Australia has urged the government to prioritise unpaid super, the super gender gap and multiple accounts rather than cave into bank-lobbying to dismantle the industry super governance model,” said the lobby group.
Industry Super Australia said the Bills could “dismantle” the governance model of industry funds, while giving “bank-owned” retail funds a pass on new disclosure and transparency requirements.
“Industry super funds have been alerting the public to the banks’ lobbying campaign to get their hands on workers’ super nest eggs. The dismantling of the industry super governance model is clearly the first step.”
Industry Super chief executive David Whiteley said: “Member-first governance and culture is the reason industry super funds outperform bank-owned super funds.”
“The success of the trustee governance model is evident in the outperformance of the industry super sector over the bank-owned super sector,” he said.
Minister O’Dwyer, rejected the argument the Government was targeting industry funds with the changes.
“The changes that we are proposing are across the board changes that apply to corporate funds, to retail funds, and also to industry funds,” Minister O’Dwyer told ABC radio.
The Bills were introduced, read a second time and then debate adjourned. Along with the House Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017 they have been referred to the Senate Economics Legislation Committee inquiries – which is due to report 23 October 2017. Labor attempted to have the reporting date moved back to 27 November (in the final sitting fortnight for the year), arguing that it was significant package of contested changes and this extension was a more realistic timetable for an inquiry, but failed.