The Turnbull government is determined to push through its stalled legislative reforms to force a shake-up of industry superannuation fund boards.
Minister for Revenue and Financial Services Kelly O’Dwyer confirmed on Tuesday that the government plans to reintroduce a bill requiring all super fund boards to be comprised of at least one third independent directors, including an independent chair.
O’Dwyer made the announcement at the Industry Super Australia conference in Canberra.
In her address to the gathering of union and industry fund stalwarts O’Dwyer was scathing of the lobby group’s opposition to government’s governance push and expressed her scepticism about the outcomes of an alternative review the industry body last year commissioned former Reserve Bank governor Bernie Fraser to lead.
Industry Super Australia along with the Australian Institute of Trustees was instrumental in stopping the passage of the bill last year. They convinced cross-bench senators to block the bill with a promise to undertake their own review into not-for-profit fund governance, followed by the implementation of a code of practice for their members.
Cross-bench senators John Madigan, Glenn Lazarus and Jaqui Lambie and the Greens said at the time they would not vote in favour of the reform, which was also opposed by Labor. Madigan said it would place unjustifiable costs and burdens on super funds if the bill passed.
O’Dwyer said the Fraser Review had disappeared into a “black hole”.
The review and code of practice were meant to be delivered by April 30, 2016, but to date have not materialised.
“It seems that this review has disappeared into a black hole,” O’Dwyer said.
“My question for you all today is, are you serious about lifting governance standards in this sector or do you want to cling to outdated practices which do not reflect the size; the scale; nor the enormous importance of this industry?”
O’Dwyer added that it was inconsistent to have parts of the financial services system, such as banks and life insurance companies, held to a higher standard of governance while there was evidence of poor practice from super funds.
To back up her point, she cited the Trade Union Royal Commission from 2014 that found TWU Super had paid an affiliated union official $93,000 for two-and-a-half days work as a ‘superannuation liaison official’.
“It is no longer credible for people to protect such cosy deals and lower governance standards, given what is at stake is confidence in the system and the retirement savings of millions of Australians.”
The minster added that she looked forward to working collaboratively with industry super funds, in particular, to hearing what became of the Fraser Review on not-for-profit superannuation fund governance.
Industry and public sector super funds typically have a “representative” board structure, comprised of equal number of directors nominated by affiliated unions and employers. However some of the top industry super funds, such as UniSuper and Sunsuper, have already begun the process of appointing independent directors.
The Financial Services Council, which represents bank-owned and other retail wealth managers, wants the government to go further and force all super funds to appoint a majority of independent directors as it requires of its members.