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The federal government’s efforts to give the banks a greater share of workers’ superannuation has suffered a setback.

The Productivity Commission has confirmed what unions have long maintained: industry superannuation funds are the best performing vehicles for workers’ retirement savings.

A draft report by the commission says bank-owned retail super funds charge twice the fees and produce  28 per cent lower returns than industry funds.

Members of industry funds such as the health care industry’s HESTA are, on average, much better off when they retire.

A retail fund member who saves 9.5 per cent of current average weekly earnings for 40 years, will earn an average annual return of 4.9 per cent and retire with $996,000.

That is a whopping $666,000 less than the $1,662,000 nest egg an industry fund member will earn with average annual earnings of 6.8 per cent.

The comparison comes from leading financial journalist Alan Kohler, who said it ought to put an end to the government’s “dishonest attacks on industry funds”.

“The fact that the government has not denounced this and given the banks a deadline for fixing the problem can only be explained by  the Coalition’s absurd bias against industry funds because union officials sit on their boards,” wrote Kohler in The Australian.

Industry funds are managed jointly by union and employer representatives.

The government has campaigned to undermine industry funds and ensure that “more of the spoils go to the private sector retail funds” despite their “exorbitant” fees, wrote Sydney Morning Herald political  editor, Peter Hartcher.

Prime Minister Turnbull, a former Goldman Sachs investment banker, and Financial Services Minister Kelly O’Dwyer, a former executive of National Australia Bank, refused to comment on the Productivity Commission’s damning findings against retail funds.

Super is an industrial right

Bernard Keane, politics editor for crikey.com.au, described the Productivity Commission report as “a ferocious blow for the government and the retail super sector. Not even Kelly O’Dwyer’s pre-emptive – and pathetic – attacks on industry funds can distract from it”.

The ACTU said the commission report made a “sound case” for  the need to reform super to elim- inate multiple accounts and unnecessary insurance.

However, the peak union body criticised the commission’s recommendation to break the link between super and industry awards.

“Superannuation is an industrial right and comes from workers’ deferred wages,” said ACTU Assistant Secretary, Scott Connolly.

“The link between employers, unions, workers and their funds has been a key reason why industry super funds have systemically out-performed bank-owned super funds, and a pillar of the success of our retirement system.”

Connolly said the commission had “ignored the need to lift the Abbott/Turnbull government’s freeze on superannuation contributions, which should be urgently raised to 12 per cent”.

Compulsory superannuation started in 1992 as a result of a union initiative supported by Labor governments.

Under the system, the employer compulsory contribution rate rose to 9.5 per cent in 2014.

It was supposed to gradually increase to 12 per cent by 2022 but the Abbott and Turnbull governments blocked its progression.

Under the Coalition, the 9.5 per cent rate will remain until 2021 and will not reach 12 per cent until 2025.

New Turnbull government legislation pushes the commercial interests of the big banks.

Superannuation bills introduced by the Coalition government into federal parliament will, if passed, help banks
get their hands on working people’s superannuation.

The bills are designed to shift control of workers’ super from the not-for-profit industry funds, which have represented them for decades, to the banks.

Banks already rake in huge fees from the retail super funds they control.

In 2016, $8.7 billion in fees flowed from retail super customers to the big banks, according to a report by Rainmaker Consulting in May.

It found that industry and company super funds accounted for 42 per cent of funds under management and received 42 per cent of all fees, while retail super funds had only 29 per cent of funds under management but received 50 per cent of all fees.

NSWNMA General Secretary Brett Holmes says there would be no benefit for nurses in moving their super from industry funds to the banks.

He says that despite charging higher fees, retail funds continue to underperform the non-profit sector.

“Past returns have always shown that industry funds out-perform for-profit, bank-owned funds.”

Monthly data from SuperRatings shows, on average, industry super funds outperformed bank-owned super funds by more than 2 per cent a year during the 10 years to 30 June 2017.

The government bills are designed to reduce the representation of workers on superannuation boards, make it harder for workers to bargain for industry funds, politicise the independent regulator and give it powers over industry funds that the big banks aren’t subjected to.

The bills would force industry funds to adopt the same sort of board governance structure as banks and the super funds they control.

This is despite the fact the banks are plagued by scandal and industry funds generate better returns.

“Superannuation should be not-for-profit, and banks should not be allowed any more control over super,” Brett says.

Bank Super scandals

ANZ had to pay an extra $10.5 million to 160,000 customers after ASIC found it had incorrectly processed members’ super contributions and failed to deal with lost inactive member balances correctly.
Commonwealth Bank must repay an estimated $105.6m for charging fees where no advice was provided. As of
19 May 2017, CBA had repaid or offered to repay $5.85m.
ASIC alleges Westpac subsidiaries provided personal advice to customers, recommending they “roll out of their other superannuation funds into Westpac-related superannuation accounts” even though they were not legally allowed to provide personal financial advice.
NAB’s super trustee, NULIS Nominees, had to repay $34.7 million to 220,000 super accounts in Feb 2017.

Strong returns for low fees

Australian unions won industry super-annuation for all Australian workers through a series of campaigns from the 1980s.

Industry funds have a 50/50 split of employee and employer representatives on their boards, which gives working
people a say in how their super is managed and invested.

Economics commentator Bernard Keane describes it as “a hugely successful model that contributes more than a third of Australia’s vast $2 trillion-plus savings pool and earns strong returns for low fees. It’s a credit to both corporations and unions that they’re able to oversee such a successful sector.”

Industry Super performs best

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