Industry Super Australia (ISA) has questioned why the government's super board shake-up proposal has seen not-for-profit super funds hit hardest.
In the draft legislation, released today, the government has proposed that all APRA-regulated superannuation funds would be required to have a minimum of one third independent directors and an independent chair.
Assistant Treasurer Josh Frydenberg said the proposed reforms were aimed at improving the governance structures of superannuation funds.
"[This] is in-line with several recent independent reviews of the superannuation system that recommended that superannuation trustee boards include a higher number of independent directors," Mr Frydenberg said.
"Further, the Financial System Inquiry (FSI) recommended that boards have a majority of independent directors, including an independent chair," he said.
ISA deputy chief executive Robbie Campo said he was "astounded" by the decision.
"The watchful eyes and questioning minds of industry super fund directors have not only delivered the best performing funds, they have avoided the widespread consumer losses and scandals which have engulfed the major banks and wealth managers over recent years," she said.
The FSC said it had led the push for the board changes since 2013 and urged parliament to pass the reforms.
“As superannuation grows from $2 trillion today to $7 trillion by 2035, good governance will be imperative for protecting consumers from potential conflicts of interest that may arise on boards of superannuation funds,” the FSC said.
BT Financial Group also welcomed the government's announcement and said the move would create more competition.
“Increasing the number of independent trustees will create new competition for positions, broadening the talent pool from which directors are drawn, and ultimately delivering better outcomes to fund members," Melinda Howes, general manager, superannuation at BTFG said.
Industry Super Australia's chair Peter Collins noted, however, that to the extent that the government sought to legislate in order to require funds to have a majority of independent directors, it did not have a mandate.
"At no stage prior to the last election did the Coalition raise the option of a majority of independent directors," he said.
"There is a real danger that imposing uniform requirements will dilute the diversity of governance arrangements and increase systemic risk in our super system."
The exposure draft legislation stated that the definition of 'independent' is to include persons who do not have a substantial holding in the trustee or do not have (or have not had within the last three years) a material relationship with the trustee, including through their employer.
A three-year transition period would apply for existing funds.
Mr Frydenberg added while the government has carefully considered this FSI recommendation, it considers the proposal for one third independent directors and an independent chair will "substantially strengthen" governance arrangements.
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