The government’s Your Future Your Super draft legislation, released late Thursday, will require trustees to prove that they are acting in the best financial interests of members by identifying a “quantifiable financial benefit” backed up by “robust” evidence when spending member money.
“Numerous reports and hearings in recent years have highlighted the extent of spending by superannuation funds on discretionary items like advertising, sponsorships and corporate entertainment,” the draft legislation reads.
“Inappropriate expenditure on these items risks compromising member outcomes and eroding retirement incomes.”
The draft legislation gives a number of examples of inappropriate spending, including on wellbeing and counselling services as part of a “holistic retirement experience”. However, the legislation does give some breathing room on advertising, with campaigns that provide a quantifiable benefit to members – such as creating fee reductions or enhancing performance by bringing new members into the fund, as was the case with one campaign run by AustralianSuper – getting the green light.
“Other strategic discretionary expenditure, such as expenditure relating to building a brand, promoting awareness of the fund or supporting external activities, which are not supported by an identifiable and quantifiable financial benefit to members, articulated in a clear business case, are unlikely to satisfy the requirements of the best financial interests obligation,” the draft legislation reads.
The legislation also lays out potential civil penalties for trustees found to have breached it, escalating to criminal penalties where dishonesty or an intention to deceive or defraud was found.
Senator Andrew Bragg championed the draft legislation, saying the new laws “will stop the waste” and lashing television campaigns run by lobby group Industry Super Australia featuring its chairman Greg Combet.
“Super funds shouldn’t waste a cent of workers’ money. This applies to all funds equally. The most shocking waste is occurring through the political Combet adverts. These must go,” Mr Bragg said.
Better late than never I guess. But what about the payments to Unions, where do they fit in?
I get that the LNP are pushing this because many see Industry funds are proxy union organisations. I have not issue with them making sure Industry funds don’t waste the member funds. However, are they also going to look at why most retail funds have admin fees of 0.3%-0.6%? surely having admin fees of this level is worse than Industry funds using their lower fees to do some advertising.
I’ve found the current version of more retail funds are cost competitive against industry funds — it is the huge profits they get from older products that is causing the issues for them but they are too greedy and stupid to update the fees on historical products
Thats not correct at all, for example a balanced fund with a wholesale platform with a well known non industry super fund, the total expense ratio is .95% that includes all fees. Aus Super offers the conservative balanced fund at .43% MER, but there is a $137 admin fee plus a .04% trustee fee, so on $15,000 for example you pay .95% with the “retail” fund and 1.39% with Aus Super. Host plus conservative balanced is 1.22% overall, these are real numbers here.
DSR, interesting that you are using a select investment option with a balance of $15,000 to try and show that retail funds don’t charge much. I don’t go for any balanced funds, industry or wholesale (much prefer index funds) but you have missed the point.
Which is worse for the consumer:
1. Industry funds which charge lower admin fees using some of this to spend on advertising.
2. Retail funds which charge higher admin fees and use some of it to go back to executives and/or shareholders.
If Senator Bragg was serious about making things better for the consumer he would be minimising the admin fees all super funds could charge.