Judith Sloan, Contributing Economics Editor
5 February 2019
The final report of the royal commission released yesterday contains 76 recommendations. Seven of these relate directly to superannuation.
Notwithstanding the importance of superannuation — it is noted in the report that the current amount of superannuation assets under management amounts to 140 per cent of total GDP — superannuation was given relatively little direct attention during the course of the investigation. There were only two weeks of public hearings devoted to the topic.
However, there is considerable meat in some of the recommendations, although some options that were canvassed were rejected — for example, the prohibition of for-profit super funds. By the same token, the report contains discussion of the need for the careful handling of conflicts of interest by the trustees of retail funds and the requirement to serve the best interests of fund members above all other interests.
Unsurprisingly, there is some overlap between the recommendations of the royal commission and those of the Productivity Commission report on superannuation. Commissioner Kenneth Hayne is very attracted to superannuation members having only one default fund and that arrangements need to be put in place to ensure members do not accumulate multiple funds (with multiple fees and charges and insurance coverage) unwittingly.
The government has legislation that has been passed by the house that will give power to the Australian Taxation Office to consolidate inactive and low-balance accounts.
Given that Bill Shorten has already declared Labor will support all the royal
commission recommendations, there should be no problem with Labor allowing this bill to be passed by the Senate.
Hayne also examines the governance of funds and queries whether the equal representation model of industry super funds is always fit for purpose. While baulking at legislated directives of the composition of trustee boards, he clearly thinks there will need to be changes to ensure properly qualified trustees are fulfilling the sole purpose of benefiting members rather than meeting the needs of their nominating organisations.
There are also some useful suggestions such as prohibiting the deduction of fees for advice from MySuper products; a ban on canvassing for super through telemarketing, for example; and a proscription of treating of employers by superannuation funds in order to entice them to select particular default funds. This latter recommendation could call into question sponsorship arrangements that many super funds have in place.
In sum, the small section of the final report of the royal commission on super contains a number of sensible recommendations, some of which are already in the pipeline.
With Labor’s support, some changes can be made quickly while others will take a little longer.
The key is that the interests of members must be at the heart of the superannuation system.
Both the regulatory framework and the activities of the regulator must ensure that this principle is always met.