The imposition of independent trustees could be the trigger for some corporate superannuation funds to close.
Bruce McBain, chief executive of the Corporate Superannuation Association, has written to Treasury urging them not to impose a quota of independent trustees onto boards of his member funds.
The association believes the extra costs of employing independents could make sponsor companies struggling in a tough economic environment consider closing down their funds.
The association’s member funds, which have $75 billion under management, argue their model of directly elected members is distinct from the conflicts of interests from those appointed by a union or an employer.
Its response to Treasury states: “Where union or other bodies nominate board directors, there is a distance between the membership and the director. The director will have a relationship with the body that appointed him or her and not directly to the membership.”
The response also states the election process for corporate super funds tends to focus on finding members who have a particular skill set and that the only use for an independent would be to fill a skill set, but not to balance any competing interests.
Talking to Investment Magazine, McBain said the imposition of independent trustees offered no clear benefit for the funds he represented, not least as the motivation and engagement of corporate super board members was so high.
“Employee trustees have skin in the game. They are close to the member unlike retail funds,” he said.
McBain highlighted the placing of several corporate funds within the Australian Prudential Regulatory Authority’s list of high performing funds over the last 10 years as evidence of this commitment.
Some corporate super funds might be forced to get rid of existing trustees to comply with the Treasury proposal. Where employers were already under cost pressures, McBain said the rule change would be a “further trigger point for a fund to consider outsourcing”.
The Treasury proposal, which is outlined in its consultation paper Better regulation and governance, enhanced transparency and improved competition in superannuation, could mean that many corporate funds with six trustees are forced to increase to nine or cut a third of existing trustees.