Coalition fails to damage industry super
The Liberal–National Coalition government and big banks have waged a long campaign to weaken industry superannuation, the system which most nurses rely on to accumulate retirement income.
Large numbers of members of retail funds have switched to industry funds following findings by the Productivity Commission and Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry that industry funds have consistently outperformed retail funds.
Industry super funds receive employers’ compulsory super payments on behalf of employees and are jointly managed by equal numbers of employer and union representatives.
The Coalition government is ideologically opposed to union involvement in superannuation.
The Coalition has strongly supported so-called retail funds owned by banks and financial services companies like AMP.
Despite that support, retail funds have been losing account holders in droves.
“Almost $11 billion flowed out of scandal-plagued retail superannuation funds into industry funds in 2018,” the Australian Financial Review reported.
“(Royal) Commissioner Kenneth Hayne found retail funds to be riddled with problems but identified few failings by industry funds,” the paper said.
The findings of the Productivity Commission and royal commission represent a spectacular own-goal by the Coalition government.
The government tried to legislate to make it easier for employers to switch their employees from industry funds to for-profit retail funds. The move failed when independent senators voted with the ALP and Greens to defeat the legislation.
The government then ordered the Productivity Commission to examine the superannuation industry, thinking the findings would favour retail funds.
Instead, the Productivity Commission reported that industry funds outperformed for-profit funds by nearly two percentage points.
The Coalition government repeatedly refused to order a banking royal commission on the grounds it wasn’t necessary. It finally did so after some Nationals MPs threatened to break ranks and vote with Labor to establish a royal commission.
Furious at being forced into a royal commission, the government expanded it to include superannuation funds as “a direct smack at Labor” as one Coalition source told the Australian Financial Review.
That move backfired by delivering an even bigger blow to retail funds. The royal commission found they were managed in the interests of shareholders rather than members and riddled with conflicts of interest and corruption.
Why we support industry super
More than five million workers belong to industry super funds such as HESTA, the health care employees’ fund.
Industry super was set up in the 1980s by agreement between the union movement and Labor government. The aim was to give working people an income stream to supplement the old age pension.
Industry super funds do not pay dividends to shareholders, they charge low fees and deliver better returns to members than corporate-owned retail funds, which are backed by the Coalition government.
As the Australian Financial Review noted: “It is a combination of member switching and excellent investment returns that has ratcheted up the growth of industry funds to the extent that they will soon overtake self-managed super as the biggest segment of the market.”
Where the parties stand on SUPERANNUATION
- Tried to legislate to make it easier for employers to move their employees from industry funds to inferior retail funds.
- Opposed Labor’s Future of Financial Advice (FOFA) laws, designed to clean up the conflicted and corrupted financial advice industry.
- Tried to protect big banks by blocking the royal commission for two years.
- Passed laws to stall the increase of employer contributions from 9 to 12 per cent.
- Increased the Superannuation Guarantee from 9 to 12 per cent, introduced low-cost MySuper accounts and superannuation tax concessions for low income earners.
- Promise to make it easier for workers to recover their unpaid superannuation as an industrial right.
- Promise to implement “policies that work towards closing the significant gender gap in superannuation savings”.
Want to promote greater competition with legislation that forces big banks and financial institutions to break up their businesses and operate in just one of four areas:
- Retail banks, that take deposits and give loans including credit cards, mortgages and business lending
- Superannuation funds
- Insurance, including life insurance
- Complex wealth management products.