The Morrison government’s latest attack in industry super, its Your Future, Your Super reforms, has suffered some major blows.
In April, point woman on the attack, Superannuation Minister Jane Hume, was forced to abandon the most blatantly targeted aspect: the omission of administration fees from the planned fund benchmarking tool (a U-turn hilariously spun by government stenographers as a triumph for consumers).
Then last week, simply to secure passage through the House of Representatives, Treasurer Josh Frydenberg caved in on the other primary mechanism designed to target industry funds: a personal power of veto over super investments.
This would have enabled a Liberal treasurer to prevent super funds from investing in renewable energy, or advertising their products, or funding research into their investments. Frydenberg’s proposed power of veto had drawn even the government’s traditional allies out into open opposition — even if they were dismissed by Hume as “vested interests”.
The bills form part of a broader attack on super funds and the rights of investors. Frydenberg is also seeking to push through extraordinary limits on free speech for proxy advisers and investors to reduce the capacity of institutional investors to obtain information analysing companies, as well as watering-down continuous disclosure laws and trying to limit class actions.
Throw in that ASIC has been directed to ditch its “litigate first” regulatory approach and adopt a business-friendly “pro-recovery” stance, and it’s clear the Coalition has, very blatantly, aligned itself with the interests of company boards and executives — who make the decisions to donate to them — and against investors (and free speech).
The super bill has now limped to the Senate, minus its two big guns designed to pummel industry super into submission. But the proposed legislation remains remarkably skewed towards the interests of underperforming retail funds.
The annual performance benchmarking test to which funds will be subjected, and the new YourSuper comparison tool that will be established to enable consumers to compare the performance of different funds, will be limited to (mainly industry super-run) MySuper products. Fully one-third of all super funds (other than self-managed super funds), in so-called choice products, will be excluded from the test and YourSuper — products mainly run by retail funds.
That’s contrary to the recommendations of the Productivity Commission, which the government invokes as the basis for the whole reform package. In its 2018 superannuation report, it explicitly said all super products should be subject to a comparison tool, despite the arguments of retail funds operators like IOOF, BT and MLC.
“The commission’s view is that all products should be required to have one-page dashboards, with exceptions only granted on the basis of evidence under the principle of ‘if not, why not’,” it said.
This view was reinforced by the fact that these “choice” products in many cases underperform MySuper products; the Hayne royal commission examined the case of one AMP product that generated a negative return on a cash product.
Another 22% of super monies covered by what are called “multisector choice” products –another lower performing sub-sector — would eventually be subject to annual performance testing, but would not be covered by the online comparison tool either.
There’s also something peculiar about the way the government has gone about “stapling” members to super funds, with the purported intention of preventing the proliferation of super accounts as workers move to different jobs and ensuring new employers do not direct super payments into other default funds rather than the worker’s preferred fund.
By implementing stapling and performance benchmarking side by side, the government ensures that a huge proportion of workers will be stapled to their existing, underperforming fund, most likely run by a retail fund, rather than waiting for underperformers to be weeded out.
The government bill also ignores the Productivity Commission’s recommendation that underperforming funds — again, most likely to be retail funds — be wound up and members transferred to better performers.
It’s almost as if, whenever there was a judgment to be made about whether to look after retail funds or look after their members, the government came down on the side of the former, not the latter.
One tiny but important correction, Bernard … the Government isn’t making a ‘broader attack on investors’ just on small end of town investors. What sticks in the craw of Co-alition governments is that wage earners have come to have real clout in the financial markets and boardrooms of Australia through industry super. The attempt to leave administrative fees out of the benchmarking tool for super funds was just one more example of how brazen the Morrison Govt is in protecting big vested private interests. Every review of super since Cooper has shown that the industry funds have returned on average 2% pa more than the retail funds over the last 25 years because the retail funds have creamed off around 2% a year in admin fees and other charges.
Agree, many ideologues and Liberal MPs with some sectors inc. banking and vested interests, view industry funds, with increasing capital and high returns, as an existential threat to power.
They only have to see Canada e.g. Ontario Teachers’ Pension Plan has something $250billion of managed members’ funds with lots of say in company boardrooms where they invest e.g. no fossil fuels (while representing the interests of all those supposed ‘lefties’ in ‘education’).
In Australia we have just on $3 trillion of funds in super, and increasing, with commensurate and transparent influence on public companies through investment and shareholder votes…..
I’ll support that. A much wealthier friend of mine put his money into the same retail fund as I did in 1994. He put in $1.3m, I put in $30K (this was before industry super, so I had to find a private fund). Ten years later, he had $1.2m and I had $27K, because the fees had eaten up our earnings.
The retail fund never contacted me to say that there might be a problem, but he’s had a series of payments from them and big cash bonuses (amounting to about $300K) to keep him on side. That was my short experience with Commonwealth Life, as if used to be known.
Re letters to The Age: A correspondent’ s letter was about more women in Parliament because they are supposed to show more empathy etc. Jane Hulme like Andrews, Cash, McKenzie and Payne simply follow the party line. They are just as good as the men!!
What on earth are voters doing…even thinking of voting for this putrid government at the upcoming election, is against their best interests. And it is not only superannuation this lot have in their sights…there is the NDIS and the latest attack on Medicare…both of which are just as appalling!
Don’t people realise how damaging most of these changes will be to those in the lower socio-economic groups in particular?
Truly frightening!!
So many people are now disengaged from politics that they just vote for the incumbent, regardless of the fact it might not be in their interests. The LNP, being the predominant party in power since WWII, is of course delighted with this.
The donkey vote is popular, but is preferenced to the NLP, which helps to explain a few things.
The LNP know this is how it works: a few snappy bogan slogans, jobs and growth, growth and jobs, Labor bad, Labor increases taxes and steals your money, Labor will drive Straya into deep debt, China bad, America good. More money for football. That’s what it takes for the LNP to win the next election. Seems to work every time.
Crooks and thieves, on a grand scale….luckily there are plenty of other ways super consumers can get accurate info without having to rely on a stinky government product.
I typed shonky but stinky works just as well…
Shonky, dodgy, stinky, shady and somewhere in there is the downright illegal or would everyone prefer rip off?
Ta Jane Hume, perhaps we need to staple you to your not selected under performing fund, rather than the pollies one, that is rock solid guaranteed and backed by the future fund.
Hi
First, a big thanks to Crikey for providing us with a regular diet of rationality in this time of ‘dumbing down’, ‘alt-reality’ crapping on.
Second, a suggestion: how about Crikey joining with GetUp! and other like-mindeds to mount a pre-election campaign, starting as soon as possible, to name and shame these b—–ds for the significant damage they’ve done to democracy and the communities of Australia. And, given they’ve become so lily-livered as to be little better than their conservative opponents, letting Labor and other crossbench parties know the same will happen to them if they don’t start to better provide for genuine community, as opposed to purely political, interests.
Brilliant idea! America has the Lincoln Project. Something similar here is something I would definitely help fund.
It’s a pity our defamation laws pretty much prevent a local chapter of Wonkette. https://wonkette.com
Getup is a non profit Crikey is not Oil and Water.
For some people the glass is always half empty. Not even remotely oil and water. Should they want to there’s absolutely no reason they can’t work together.