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Super payments to unions under investigation: APRA
The Australian Prudential Regulation Authority (APRA) has confirmed it is investigating payments by super funds to unions.
Some of these payments related to payments for directors’ fees as union representatives sat on industry fund boards, but other payments were significantly higher than these fees.
During the Senate estimates, APRA deputy chair, Margaret Cole, confirmed to Liberal senator Andrew Bragg that there would be a formal investigation.
“This is a formal investigation and it something that will take time to work through,” Cole said.
The investigation would review donation data from the Australian Electoral Commission (AEC).
In a statement after the session, Bragg said $13 million had been sent from super funds to unions in the 2020–21 financial year. This was up from $11 million in the previous year.
Senator Bragg said: “These payments are not solely for ‘directors fees’. This is an illegal scheme designed to syphon retirement savings from super funds to the unions. The lack of enforcement action has become a joke.
“The payments are a contravention of the Best Financial [Interests] Duty for super funds. Labor wanted to weaken this test but knew the Senate would never allow it. The strong law stands.
“I look forward to the regulatory enforcement action of the APRA investigation.”
According to the Australian Financial Review, data from the AEC showed First Super had paid $3.8 million to unions in the FY20–21 while Cbus paid $1.5 million.
The issues of payments to unions had been an ongoing issue and a matter of concern for Senator Bragg. Last year, APRA said “preliminary investigations were underway” prompted by Senator Bragg’s communications including on Twitter.
APRA executive director of superannuation, Suzanne Smith, said: “We know that there are other payments, such as partnership arrangements and other fees, which will go to things such as member education or some types of health and wellbeing. They are probably the items that you are referring to, Senator Bragg, which aren’t specifically for the provision of directors.
“We’re wanting to reconcile and look at what some of those amounts are. There are some amounts in there that are curious to us when we go in and say that does look to be an amount that is more significant than we might expect for funds of a particular size.”
AUTHOR
Laura Dew
Laura Dew is editor at Super Review. Prior to joining SR, she spent five years working at Investment Week in the UK covering asset and wealth management.
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This is a very very good thing. I want to be clear that I support this 100%.
The irony is that while this review has been pushed by certain realms of politics and the retail super funds for some time, less member money going out to unions will mean the Industry Funds will wipe the floor with the retail funds in an even bigger way. Classic case of "be careful what you wish for" I reckon. Yeah, I know all the mark-to-market arguments...the problem with that is even after historical mark-to-market adjustements, the Industry Funds still absolutely hammer the retail funds in terms of performance.
An overdue and necessary stop to member money being paid to unions will ultimately mean more misery for the useless retail funds who (let's face it) really only exist to pilfer member funds in order to pay obscene salaries and bonuses to executives and investment managers...
The fees for no service issue with financial institutions was always going to end up flowing to amounts paid by super funds to unions.
These payments aren't in my interest. Much like fines and reimbursements paid by financial institutions, I'd like reimbursements from unions and fines on these large super funds, and not paid out of member benefits.
I'm not sure how amounts paid to unions for member education or some types of health and wellbeing are of any benefit to super fund members who are not in a union.
Stopping these fees also is the key to stopping super wars. Labor is motivated to drive people to industry funds, and Liberals to do the reverse, while fees from these funds end up funding Labor election campaigns.
Wouldn't an illegal scheme designed to syphon retirement savings from super funds to the unions require a collusion between government agents?
For example, APRA helped write the Superannuation Industry (Supervision) Act legislation that protects superannuation accounts that become exposed to "fraud" in the system. The legislation applies only to the APRA regulated funds. Therefore the safe superannuation option is the APRA regulated funds and consequently most Australians are herded into the APRA regulated funds. The illegal scheme designed to syphon retirement savings from super funds occurs in the APRA regulated funds.
How would superannuation account holders react if the knew how much money was siphoned from their personal fund? Luckily they won't find out as earlier this year, Assistant Treasurer and Minister for Financial Services, Stephen Jones MP endorsed non-disclosure legislation so the amount remains hidden.