Superannuation

The Hon. G.A. KANDELAARS (15:35): Today I rise to express my concerns over the federal government's proposal to change the governance arrangements for superannuation funds. The changes appear to be directed towards the industry fund sector, where most of the funds have an equal representation model, with an equal number of employee and employer representatives on boards, usually with an independent chair. The federal assistant treasurer, Kelly O'Dwyer, is ignoring calls from industry representatives for the government to dump plans to make changes to the partisan equal representation model of super funds.

Under the government's proposal, all super funds will be required to have one third of the board seats filled by independent directors by July 2017 and a majority of independent directors on an if not why not basis by July 2019. The changes are designed to break the equal representation model of industry funds, whereby employers and employee groups each nominate 50 per cent of directors. Apart from the proposal to remove the equal representation model, the proposal is also seeking to replace the two thirds majority voting rule with a simple majority for board determinations; this is equally troubling.

This model has served the industry fund sector very well for nearly three decades, and it would appear that the motivation for change here is more ideological than pointing to any failures in the governance in funds based on the bipartisan equal representation model. It appears these changes are ideologically driven, because I believe the federal government changes are based on an obsession with many unions having representation on superannuation boards.

I can talk to my personal experience of the effectiveness of the bipartisan equal representation model. I was a director of Telstra Super for over nine years, a fund which was based on a similar model to many industry funds. My appointment was through the ACTU. The Telstra superannuation board consisted of four Telstra appointed directors and four ACTU directors, with the board nominating an independent chair. I can assure you that all directors took their roles very seriously to ensure that the retirement savings of members were guarded.

We were always looking at how member services could be extended, and worked hard to provide fund members with information on trends in the investment environment of the time and feedback on the performance of the fund. The fund even established its own financial planning arm to assess members' financial literacy generally, but particularly to assist members who were facing redundancy or moving into retirement.

The bipartisan equal representation model has worked well in the context of superannuation funds and should not be changed without good reason. The industry superannuation model has served members well, providing some of the best returns for members at generally much lower fees than retail super funds. Industry Super Australia chairman, Peter Collins, a former Liberal politician and New South Wales treasurer, has urged the Prime Minister to scrap its super governance legislation.

Industry Super Australia CEO, David Whiteley, criticised the changes for 'dismantling the governance structure of the successful not-for-profit super sector while not addressing the scandals and underperformance of the bank-owned sector'. Tom Garcia, CEO of the Australian Institute of Superannuation Trustees, the peak body for non-profit super funds, including industry, corporate and public sector funds, said he was hopeful that the reforms would get voted down in the Senate.

As you can see, there is widespread concern about the federal government's proposal to change the governance arrangements of superannuation funds. Industry super funds and not-for-profit superannuation funds continue to be industry leaders. They continue to work tirelessly to ensure members get the best possible returns for their retirement savings, with low administration fees, and have consistently been recognised for this. It is interesting to note that the not-for-profit funds have won the prestigious SuperRatings Fund of the Year Award for the past seven years.