AustralianSuper chief executive Ian Silk has defended the fund’s $500,000 donation to Industry Super Australia (ISA) for the controversial Fox in Henhouse advertising campaign, on the basis that it was in the best interests of members.
Silk told the Hayne royal commission on Thursday that the board approved the donation for the ads, which ran on television in mid-2017 and attacked retail banks for trying to “get their hands on” the retirement funds of Australian super savers.
The ad was launched as the government was proposing to remove the protections not-for-profit funds have under the default fund structure, Silk said.
“The purpose of the advertisement was…to prevent the lobbying effort that was being undertaken by retail wealth management companies, in particular the big banks, to change the default system from a framework that we say provided significant protection for workers to one that exposed workers to significant risks of misselling, cross-selling and conflicts of interest that would have done them significant damage,” he told the commission in a two-hour session.
Prompted by questions from counsel assisting Michael Hodge, Silk explained that, at the time, retail funds had sought to “leverage their business relationship with employers with a view to influencing them to choose…a bank-owned fund as the default fund [for the] workplace”, which he said would have been detrimental to members’ best interests.
“The express design objective of such a change would be to see millions of Australians that would otherwise be in higher performing industry funds in poorer performing retail funds,” he said.
The recent draft Productivity Commission report into the $2.6 trillion super sector found a “clear performance divide” between industry and retail funds, with industry funds giving members average returns of 6.8 per cent, compared with 4.9 per cent for retail funds.
Silk also said a $2 million investment AustralianSuper made in online news service The New Daily assisted with member retention and provided valuable help with financial literacy for disengaged members.
He said 20-30 per cent of The New Daily now encompasses subjects related to literacy and numeracy, with the funding being paid out of $140 billion AustralianSuper’s $1.50-a-week membership fee, which is intended to go towards administration and marketing.
Silk said this was “serious money in anybody’s language for a member-focused organisation and we don’t splash money around lightly”.
The cost worked out to 20 cents a week for AustralianSuper’s 2.2 million members.
At the end of the session, Commissioner Kenneth Hayne said he had not formed a view about whether donations for political purposes, such as to the ISA for Fox in the Henhouse, would ever be in the best interests of members or assist with building their retirement savings.
“I’m not embracing the proposition,” Hayne said. “I’m saying this is the proposition that I think is in play.”
