Plenty of people in the profit-to-member superannuation fund sector breathed a huge sigh of relief on Saturday night as there was first the hope, then an inkling and finally no doubt at all that the Albanese Labor government would be returned resoundingly to power.
A near-total repudiation of conservative policies – at least as espoused by the Opposition under a leadership group including Peter Dutton, Angus Taylor and Jane Hume – means the party that created and nurtured the compulsory superannuation system, and which has been a staunch defender of preservation, has taken an even tighter grip on the reins.
For now, at least, the possibility of a royal commission inquiry into operational failures in industry or profit-to-member superannuation, and its links with the trade union movement, has receded considerably. And the return of the Labor government was met enthusiastically.
Conexus Financial founder and managing director Colin Tate AM, who attended the Labor HQ election night event with the Prime Minister on Saturday, said the result was “great for the country and great for super”.
“The resounding victory by Labor at this election should give certainty to the industry that voters have rejected the irresponsible ‘super for housing’ idea and have backed the principle of preservation,” Tate said.
Conexus Financial is the publisher of Professional Planner, sister publication of Investment Magazine.
“Beyond the industry, Australia has voted for fairness, decency and inclusion in a win for the sensible centre.”
Be that as it may, the industry/profit-to-member fund sector has in the past been guilty of hubris and blanket dismissal of any criticisms levelled at it. But it would be advised to avoid either in the coming months and years – and the new government should not let funds off the hook.
There’s plenty of valid concerns over the structure, governance and operations of funds, progress in developing effective retirement solutions and – yes – the role of super in addressing the housing affordability crisis. These must be addressed by the incoming government as a matter of urgency, whether there is a royal commission or not.
In the coming days, all eyes will be on the composition of Prime Minister Albanese’s cabinet, and who takes on responsibility for superannuation and financial services. It is to be hoped that the portfolio will have senior standing. One thing is clear: the new minister will not be Luke Howarth, Bert van Manen, or Andrew Bragg.
But whoever gets the nod – Jenny McAllister, Andrew Charlton, Daniel Mulino, Andrew Leigh or someone else altogether – will have their work cut out for them addressing the shortcomings and criticisms of a sector that has grown large on the support of tax concessions and compulsion, but in many cases has not lived up to its members needs or expectations.
It will require a minister with the vision to understand what the superannuation system should look like – that it serves members first, and that it must meet the needs not only of those saving but also those drawing down on their retirement savings – and the guts to take action that some funds won’t like. It doesn’t matter if former friends, comrades, party elders and powerful unionists sit on fund boards, it is not those people our elected representatives serve.
With an increased majority, the Albanese government can run whatever legislative agenda it wants. It must not give in to a temptation to give the profit-to-member sector an easy ride. It must square up to all funds and insist that their standards and services meet those expected of a system those same funds are fond of describing as world-class. That claim is more easily defensible on the investment and accumulation front than in other pockets of the industry, where considerable improvement is still needed.
Between now and the next election, something approaching half a million Australians will retire. Right now, the quality and effectiveness of the retirement income solutions they are offered is pretty much luck of the draw. Some funds have made considerable progress and offer a decent retirement option. Other have made much less progress and the options presented to retirees are rudimentary. The incoming government should prioritise encouraging – and if necessary, forcing – all funds to do better.
Information, advice and guidance is critical to helping members into retirement and it is likely the incoming government will proceed as expected with the Delivering Better Financial Outcomes reforms. This will allow super funds to provide targeted personal advice to members, particularly in relation to investment options, retirement adequacy and insurance. There should be little now holding back those reforms from being implemented quickly.
For trustees, this creates both opportunity and risk: opportunity in deepening member engagement and differentiating a fund’s value proposition; risk in continuing to meet their members best financial interests duties while delivering quality advice under a principles-based framework.
Boards will need to assess their advice delivery models, adviser training and internal controls as they prepare to take on greater responsibilities.
But the delivery of advice is not the only reason boards will be under scrutiny and the incoming government will be under pressure to ensure the structure and quality of super fund boards meets the standards needed to effectively govern these large, complex and vitally important financial institutions.
They must do better overseeing insurance claims, for one thing. If standards don’t demonstrably and quickly improve, minimum standards should be mandated, with penalties that make directors sit up and really take notice.
Issues such as access to super for housing will inevitably continue to come up. This has already been superbly prosecuted by Bragg and there’s no reason to think he’s going to stop now. Issues like this raise legitimate questions, concerns and policy options, and cannot continue to just be dismissed out of hand – or “abandoned permanently”, as the Superannuation Members Council suggested on Monday – in a mindless defence of preservation.
Boards will also need to possess the skills, expertise and intellect to navigate these big issues, and must demonstrate the equal-representation model remains fit for purpose. They would be foolish to expect – and the government should not allow them to think – that the pressure to perform is somehow off just because there’s a friendly government in power and the pain of a very public inquiry might be less now than it was a few weeks ago.
The superannuation system, along with Medicare and the National Disability Insurance Scheme, is emblematic of the Labor Party’s view of itself as the nation-building party. It’s true that the next three years may be simpler for the sector now than they would have been had the Coalition been elected to government, but the fact remains that the superannuation job is only half done.
The system has succeeded in helping Australians accumulate savings for retirement. It has grown large and economically very significant in doing so. Now it has to demonstrate the same commitment to assisting growing numbers of Australians from accumulation into retirement; and to demonstrate it deserves the special status it holds in society by proving it can meet high levels of accountability, transparency and responsiveness to member needs.
