Ex-APRA head slams super change
An expert on superannuation in Australia says the Federal Government is going for “entirely the wrong model”.
Wilson Sy, former head of research at the Australian Prudential Regulator Authority (APRA), says it is ridiculous that the Government wants to force changes in the “world's best practice” industry super fund model, which consistently delivers higher returns for members than the retail funds run for profit.
“The industry funds have averaged 2 to 3 per cent better [than retail funds] over a period of 20 years,” he said.
In that same period, retail funds have delivered “about four and a half per cent” after fees and charges but before tax, which is “about the same as cash”, said Mr Sy.
“I think it's looting,” he said.
“Retail funds are there to make profits for shareholders. Basically, they treat their members as consumers to which they sell some sort of financial product.”
The reforms include requiring all super funds to have some independent directors on their boards, increased transparency and accountability as well as stronger powers for APRA.
“The reform is important because independent directors bring different skills and expertise and they can hold other directors accountable for their conduct, particularly in relation to conflicts of interest,” the explanatory memorandum for the bill says.
A major part of the change is to require super funds to annually audit their MySuper investment options to “ensure they promote the financial interests of these members and make a public determination confirming this”.
Not-for-profit funds have significantly more of their members in MySuper options than their for-profit rivals do.
Mr Sy says the independent director requirement has failed to prevent workers' retirement savings being eroded by excessive fees, or two mitigate the effects of blatant conflicts of interest.
He says trustees of superannuation funds that are run for profit by banks and other financial services firms face an “inherent conflict of interest” because Corporations law requires them to serve the interests of the shareholders, while superannuation laws require them to serve the interests of the funds' members.
He said the underperformance of retail funds shows the interests of shareholders usually win out.