The industry super sector has rejected Josh Frydenberg’s “Your Money, Your Super” package of changes to superannuation as a “gift” to for-profit fund operators that will enable them to continue making billions in profits each year off dud retirement savings schemes.
According to Productivity Commission data, industry funds, which are run only for the profit of members, systematically outperform retail funds, which are run to profit financial institutions such as banks.
But peak body Industry Super Australia (ISA) will argue in submissions to a review of the package of laws that the proposed legislation would give the for-profit sector an unfair advantage by exempting many of its products from measures designed to curb fees and expose poorly performing funds.
In draft submissions to Treasury, seen by Guardian Australia, ISA also argues that changes that are claimed to force fund trustees to act solely in the financial best interests of members will drown them in red tape because almost every single piece of spending, no matter how small, will be subject to the test.
The submissions also echo concerns raised last week by Ian Silk, the chief executive of Australia’s biggest super fund, AustralianSuper, that the proposed laws would reverse the onus of proof if funds were pursued for breaches of the test by the prudential regulator.
The ISA chief executive, Bernie Dean, said the treasurer’s package could be salvaged but risked ignoring the “carnage” displayed at the Hayne royal commission in 2018, which heard evidence of widespread rip-offs in retail super but gave the industry sector a largely clean bill of health.
“It begins to look like what happens when foxes get in the henhouse,” he said – a reference to a controversial TV commercial ISA aired in 2017.
The ad, which compared banks to foxes determined to raid the henhouse of Australia’s super savings, outraged critics of the sector, who said it was an example of political spending that did not benefit members.
However, the banking royal commissioner, Kenneth Hayne, said the ad did not breach the law or community standards and recommended no law be made restricting the political speech of funds.
ISA is concerned a provision in the proposed laws allowing the Australian Prudential Regulation Authority to ban spending, even if it is found to be in the best interests of members, might be used to stop ads like the “fox and henhouse” spot or the “compare the pair” series that focuses on the investment performance of industry super.
Dean said the provision was a “kill switch” that “could lead to an unprecedented intervention into what is supposed to be a free market”.
“Don’t tell me we’re headed into a world where a regulator could ban a fund promoting its own out-performance,” he said.
“We are concerned that if these changes are passed by the parliament unamended, they could handcuff industry super and provide some of the worst performers in the retail sector with a free pass.”
Treasury’s consultation period on the proposed laws closes on 24 December.