I was recently at an industry conference where changes to the default-fund system were discussed. Throughout the session, we heard about the impact on employers, insurers, funds and other providers but members – and what was best for them – didn’t rate a mention.
In her recently published book, A Super History, Christine St Anne reminds us that super was conceived as policy with social objectives rather than a commodity to pad the purses of financial intermediaries. The book – which provides a fascinating insight into the passion, political drama and colourful characters behind our super industry – records how universal super was a hard-fought workplace entitlement, along with a compulsory retirement age, redundancy provisions and better long-service leave.
The book also shows us that despite being traditional adversaries, business and unions can build systems for the greater good. In addition to recognising the union’s role in building the industry super movement, St Anne outlines the involvement of key-employer groups, including the Australian Chamber of Manufactures, which set up the Australian Retirement Fund (now merged into Australian Super).
All about the members
In talking to industry pioneers, we learn about the rationale behind the so-called equal-representation system of governance and why it is so pivotal to the success of not-for-profit funds. Under the trustee-representation model, an equal number of
representatives from employer and employee groups are nominated and appointed to the boards of most not-for-profit funds. This arrangement has proven to be highly functional and effective – and importantly, very adaptive to profoundly changing market and commercial circumstances over time.
The occupational link with superannuation has seen many funds tailor their products to suit the specific needs of their membership base. For example, without the tailored insurance offerings provided by some industry funds, many workers in physically demanding jobs would be unable to access total permanent disablement insurance and income protection. Since the advent of compulsory super, markets have risen and fallen, new demographic and technology challenges have emerged and commercial challenges have proceeded apace, but not-for-profit funds have continued to deliver superior results and grow spectacularly.
Collectively, not-for-profit funds have outperformed other pooled superannuation funds with different ownership and governance structures. This outperformance is close to 2 per cent annually and translates into many thousands of extra dollars in retirement savings for ordinary workers.
In working cohesively together on the boards of not-for-profit superannuation funds, employee and employer groups have played a pivotal role in ensuring that members’ needs always come first.
The fact that representative directors are independent in the corporate sense, and are free to act without shareholder influence, also appears to drive the outperformance of not-for-profit funds. Another important attribute of the trustee representative model is the diversity it brings to the boards of superannuation funds, which generally have far greater occupational, gender and age diversity than corporate boards or the boards of retail funds.
But perhaps, most importantly, the equal-representation system helps ensure that superannuation isn’t just a product and that members’ needs not only rate a mention, they rate above everything else.