Chairs silent on super gouging by big four and AMP

The Australian

21 July 2018

Anthony Klan

The chairmen of each of the big four banks and AMP, which manage more than $240 billion of the public’s superannuation savings across six main super funds, have all refused to say whether they ­believe the executives of those ­financial giants have broken the law by engaging in wide-scale gouging of millions of their super members.

The revelations come as The Weekend Australian can reveal the federal government’s long-delayed proposed changes to superannuation law — nominally aimed at closing a decades-old legal loophole that prevents super trustees from facing any penalties should they break the law — also contain a potential loophole.

The Weekend Australian has revealed widespread gouging by the big four banks, such as paying super members returns on simple “cash” investments as low as one-quarter of actual market rates — in some cases even negative ­returns — has had a devastating effect on long-term returns.

Audited performance data provided to the Australian Prudential Regulation Authority by Westpac, NAB, CBA, ANZ, AMP and IOOF shows the biggest super funds operated by each of those institutions — comprising five million member accounts — delivered average annual returns to members of between 2.1 per cent and 3.1 per cent over the ­decade to June 30 last year.

Those returns were roughly half the market rate for the types of investments those funds had actually made, roughly half the returns achieved by the major so-called “industry” funds such as AustralianSuper, and roughly half the returns of the super funds ANZ, CBA and NAB run for their own staff members.

Under the Superannuation Industry (Supervision) Act 1993, trustees must abide by strict rules, such as always acting in the best interests of members, and placing the interests of members ahead of the interests of the bank or company they work for, should any conflict arise.

The act stipulates penalties of up to five years’ jail and “punitive” damages, but as previously revealed, there was a carve-out in the law that meant the penalties did not apply to trustees of big super funds, and no federal government since 1993 has closed that loophole.

CBA chairman Catherine Livingstone, Westpac chairman Lindsay Maxstead, ANZ chairman David Gonski, NAB chairman Ken Henry — a former federal Treasury secretary — and AMP’s interim executive chairman Mike Wilkins, installed when the group’s chairman and chief executive stood down following recent revelations of fee-gouging by the group, all declined to respond to written questions.

Media representatives of each of those major banks and AMP would not confirm they had passed on The Weekend Aus­tralian’s questions to their chairmen, or say whether the chairmen had been made aware of the ­questions.

The issue is particularly serious given that the key responsi­bility of a chairman under corporations law is to ensure a company’s management acts honestly and legally.

The federal government has said its proposed changes to the SIS Act would reverse the 1993 carve-out of penalties for trustees of major funds, but the wording of the proposed changes suggests that even if the amendments are passed — they have been several years in gestation and the ALP is refusing to back them on the ground they are “limited and incomplete” — they may not apply to many trustees.

Rather than simply ensuring the penalties clearly stipulated in the SIS Act 1993 apply to all trustees, the changes state that trustees can face punishment only if they break the laws, and if those same laws are “contained or taken to be contained” in the governing rules of the super fund.

A spokesman for Financial Services Minister Kelly O’Dwyer said the proposed amendments did not create a new loophole.