In its submission to a federal Senate inquiry into the super sector, the ACTU said reforms announced by the government in the most recent federal budget – which have been met with criticism from the industry fund sector – would “favour for-profit funds” through measuring fund performance by net investment return.
“Current benchmarking proposals exclude member administration fees, meaning the Government proposals will be deliberately misleading workers into thinking they are members of a well-performing super fund,” the union said.
“This is an attack based on ideology, rather than the best interests of workers as those in industry funds can expect to retire, on average, with a larger balance at retirement due to better performance and lower fees.”
Combined with proposals to “staple” workers to a single super fund for life rather than a separate default fund for each workplace, the union said this could result in “predatory for-profit funds” seeking to target young consumers before they began work.
“If these proposals become law, from 1 July 2021, all people with an existing superannuation fund will be stapled to their current fund, meaning predatory for-profit funds will target first time bank openers to nominate a super account with them, locking them into a poor performing default fund for life,” the ACTU said.
The union’s assistant secretary Scott Connolly said the reforms would “short-change workers and erode the hard-won retirement savings of millions of Australians”.
“A worker could be locked into an underperforming for-profit fund that is funnelling money to shareholders through exorbitant administration fees – and be misled by the government that they are in a good fund,” Mr Connolly said.
“It is no coincidence that administration fees are excluded from benchmark proposals, as for-profit funds performances will be overstated to members and potential members.
“If these laws are passed, for-profit funds will have a systemic advantage over all-profit-to-member funds, leaving workers worse off.”
The union also flagged concerns with proposals in the draft legislation that the minister be given unilateral powers to declare “any expense, investment, or activity, by any fund, at any time, illegal”, following criticisms of industry funds’ use of member money for initiatives such as news site The New Daily.
“Funds would be beholden to a single Minister’s preference as the Minister is not required to give notice nor reason, and these regulations are not able to be challenged in court,” the union said.
