Industry Super Australia (ISA) released a four page statement on 5 June 2018 on my recent articles and presentations. ISA’s four page statement is not only a waste of workers’ superannuation but reinforces points I have been making that industry super funds are:
1. Delivering extensive funding to the union movement (at least $60m in the past 10 years according to the Australian Electoral Commission & growing to $22m per annum within a decade);
2. Developing into a US-style “Super PAC” which aggregates large sums of money for aggressive campaigns – in this case by using retirement savings;
3. Union controlled and have union links which can damage investor (member) interests; and
4. Resisting reforms to improve the transparency and governance standards of the whole superannuation industry purely for self-interest.
This is my longstanding belief. In December 2014 I wrote in the Australian newspaper that:
“The interrelated issues of low standards of corporate governance in the superannuation industry and conflicted and anti-competitive relationships between industry funds’ boards and the default superannuation laws must be addressed by the Parliament.”
I do not need four pages to respond to the statement paid for by superannuation members. The substantive points are:
1. No explanation of why at least $60m has been paid by super funds to unions over the past decade has ever been provided.
The $60m paid to unions over 10 years is not disputed by ISA, nor is the estimated growth in payments to unions of $22m per annum within a decade;
2. ISA has failed to explain why super funds do not publish a breakdown of payments on super fund websites. The most relevant admission is:
“Payments by industry super funds to unions and employer groups are primarily for services, including for director remuneration, marketing and sponsorship.”
If so, why not disclose this on fund websites or annual reports? What do you say to members who are not members of a union when you are sponsoring union conferences? Union payments, corporate spin doctors, advertising campaigns, sponsorships, big fees to union directors are all paid for by monies saved by workers - many of whom don’t have enough saved for retirement.
The ISA statement tries to defend CBUS’ significant payments of $13m to the CFMEU by arguing that payments are for “branding, member education and advertising opportunities and for director fees”. Again, why not disclose this on the website? Most companies don’t make big payments to unions. Given 85% of Australians are not union members, this would be of interest – especially to unwitting members of the public that have joined CBUS. Would a small business owner really want to be funding the militant, law breaking CFMEU with their retirement savings?;
3. “Super PAC” behaviour is now on show. Few sectors of the economy have such significant resources to waste time generating four page statements to which scant attention is paid.
Money is no object. According to Michael Roddan in the Australian, the budgets of three of the four superannuation bodies are devote almost $50m per annum to promote industry super:
“ISA last year ran a budget of $22m paid for by its 16 member funds. The FSC has a budget to the tune of about $9m a year. AIST charges its member funds just under $10m for representation, while ASFA has annual revenue of about $13m.”
Disclosure – I formerly worked for the FSC;
4. Payments from industry funds to unions are likely to be higher than $60m.
This baseline number is only known because associated entities (unions) are captured under electoral law and must disclose payments received– including those received from super funds. As some unions are not associated with political parties, their receipts are not captured by the AEC and we do not know how much money has been paid by these super funds to unions. They remain secret payments;
5. Unions control 50% of many industry funds – through 50% board membership or by owning half of the shares in the super trust or company.
The current union agenda of advocating an uncompetitive tax system (opposed to company and personal tax reform) and anti-trade (opposes China-Australia FTA and TPP) is inconsistent with member (investor) interests. This is magnified because 85% of Australians are not union members but the super funds are open to the whole public;
6. Law reform should deliver:
a. Independent directors onto all superannuation boards – be it bank, insurer or union. This will surely end the opacity and ultimately the payments. The Senate should act in the national interest and pass the Bill on the table;
b. An end to the Orwellian Fair Work Commission dishing out $10 billion a year in “default” super contributions to industry super funds and foster competitive tensions as the Productivity Commission has recommended. This will drive better behaviour and hopefully lower fees for all Australians; and
c. All Australians should be free to select their own super fund. Workers should not be trapped into enterprise agreements which remove their right to choose a fund.