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SMC warns Bragg’s proposals could make profit-to-member funds ‘almost impossible’
The SMC has reacted to a report advocating reduced union involvement in super funds tabled on Thursday on behalf of Senator Andrew Bragg.
The third interim report of the 15-month inquiry into Australia’s retirement system, tabled Thursday, highlighted “shocking governance standards” and recommended addressing conflicts, competence, and independence within the super sector, particularly in response to issues at Cbus and other funds, according to Senator Bragg.
Responding to the report in a statement to Super Review, Super Members Council CEO Misha Schubert said that while the council welcomes discussions on “sensible, evidence-based policy”, it does not support proposals that could undermine or dismantle a model that has delivered strong returns for members over the past three decades.
“The report’s recommendations would fundamentally alter super funds’ structure in such a way that it would be almost impossible for profit-to-member funds to exist,” Schubert said.
“This would disenfranchise 11 million Australians who choose to have their retirement savings managed by a profit-to-member fund with equal representation – and risk making them poorer in retirement.”
Bragg’s report, described last week by Labor senator Jess Walsh as “unserious”, made seven recommendations, including requiring superannuation trustee boards to have a majority of independent directors, an independent chair, and a public skills matrix for director appointments.
It also suggested empowering the Australian Prudential Regulation Authority (APRA) to remove trustees with material conflicts of interest, mandating reporting on best financial interests duty (BFID) decisions, and requiring super funds to maintain separate funding for trustee misconduct costs.
The government is also urged to develop mandatory insurance service standards for super funds, in consultation with consumer advocates, regulators, and industry stakeholders.
“Our recommendations prioritise consumers over shareholders,” Bragg said last week.
However, Walsh, deputy chair of the Senate economics references committee, accused Bragg of tailoring a report reflective of his “long-held loathing” of Australia’s superannuation system and unions’ role in it.
“Across three interim reports, the only suggestion Senator Bragg has offered for improving Australia’s retirement system is to dismantle the best thing about it – our world-leading superannuation system,” Walsh said in a statement.
“It is a waste of a 15-month inquiry for Senator Bragg to just rehash and reheat a position the Liberals held 10 years ago.”
What’s in the report?
The report dedicates an entire chapter to questioning the efficacy of the equal representation model in industry funds, citing the Cooper and Murray reviews, which suggested superannuation boards would benefit from a greater number of independent directors.
The report also dedicates several pages to Cbus, which has been embroiled in controversy over recent months, with APRA just this week announcing further action to address concerns identified within the fund, alongside an investigation into the possibility the fund breached the SIS Act.
Moreover, the report questions the effectiveness of the best financial interests duty, saying that APRA’s recent enforcement actions against Cbus Super and First Super highlighted ongoing challenges with compliance, conflicts of interest, and governance practices under the BFID framework.
AUTHOR
Maja Garaca Djurdjevic
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