Remarks at Friedman Conference 2018

Super funds underwrite super unions

Industry super funds have made Australia’s trade unions our own only mega rich US-style PAC or political action committee.  

Unions sit on assets of more than $1.5 billion, thanks in part to industry super funds which have gifted $60 millions to unions in the past decade. 

Union controlled industry funds are another example of the financial services sector having more than its fair share of rattlesnakes in the cupboard. 

The last few months have revealed, however, how many of us (myself included) got it wrong on a Royal Commission. The testimony on financial advice has been truly shocking. 

Soon the Royal Commission will begin examining the superannuation sector. 

I make three points in the lead up to these hearings. 

1.    Secret industry fund payments to unions are as shady as banks and insurers charging dead people for financial advice;

2.    Australian Electoral Commission (AEC) figures show payments from industry funds to unions will balloon to $22 million each year within a decade; and 

3.    How the Royal Commission (and the Senate) can fix it.

SECRET PAYMENTS 

First, failing to disclose the $60 million in industry fund payments to unions and what these payments are for in annual reports or on websites is as opaque as it gets. 

This information is actively concealed from unwitting savers.

Superannuation is compulsory and most Australians do not select a fund of choice. Industry super funds have a monopoly on “default fund” selection through the Fair Work Commission where they receive $10 billion a year - guaranteed. 

With union membership at less than 15% of the workforce, most Australians have actively chosen not to support unions yet almost all of us are supporting kickbacks to union campaigns through payments from industry super. 

If people knew they were supporting the CFMEU, they would likely take their super elsewhere.

CFMEU boss John Setka said last week: 

“We get fantastic pay rises and good conditions for our members because we fight it outside the law. And if that sometimes brings us on the wrong side of a bad law - and there [are] bad laws - then so be it."

It is the hard-working non-unionised, law abiding workers who are automatically signed up to funds like CBUS that are paying the CFMEU’s $15m legal bill for breaking our laws.

UNION TYCOONS GETTING RICHER 

Second, the latest AEC figures including 2016/17 show another $6 million was paid in this year from industry super funds to unions. This new data brings the total amount paid to almost $60 million over the 11 years reporting to the AEC has been required under law. 

At the current growth rate, payments are on track to hit $22 million per annum within the next decade. If you are a member of an industry superannuation fund, every cent of these payments is taken directly from your retirement savings. 

By far the largest beneficiary of union fund largess is the law-breaking CFMEU, which has benefited to the tune of over $13 million. 

Industry funds Host Plus, LUCRF and TWU Super have been particularly generous, each paying various unions between $7-8 million each, and even Australian Super, has paid unions almost $5 million.

Perhaps of greatest concern are the opaque payments coming out of the elusively named Industry Super Holdings (ISH), which is a wholly owned industry fund conglomerate. 

ISH companies paid unions an additional $5 million since 2006, including a range of large ‘once off’ payments, such as $1.1 million to the AMWU in 2015-16, and another $900 000 to the same union the year before. 

What is this money for? Union appointed directors have never been asked to justify the payments and demonstrate they are not consumer rip offs.

The ACTU has set the standard against which industry fund directors and CEOs will be judged in the upcoming superannuation hearings. 

The ACTU gleefully welcomed the resignation of AMP’s CEO as a suitable punishment for ‘swindling thousands of Australians out of their hard-earned money.’ 

This is a standard which should be applied broadly. But we shouldn’t hold our breath. 

The world class hypocrites in the union movement demand companies they invest in have a majority of independent directors. Yet they decline to adopt the same standard. 

Equally, despite being obsessed with tax, unions invest in tax havens such as Guernsey.  

WHAT MUST BE DONE

Third, the Royal Commission must make it clear the Senate must urgently pass laws to improve superannuation governance and transparency. 

At a minimum, payments from super funds to political organisations should be fully disclosed in annual reports and available online.  

People should be able to see how much of their retirement savings has been given away by their industry superannuation fund to trade unions.

To get the facts into the public domain I have established a new searchable portal to present the data on the siphoning of retirement savings to unions: www.andrewbragg.com/supercheck.  

The new tool allows you identify just how much of people’s retirement savings each super fund has paid to each trade union over the past 11 years based on AEC data. 

The only reason these figures have come to light is through manual fusing of spreadsheets from the AEC.  

Until a higher standard of transparency is required under law this database will deliver transparency to working Australians.