The failure of the government's "poorly drafted" superannuation governance legislation to pass the Senate may have been a "blessing in disguise", argues a new working paper from the Centre for International Finance and Regulation (CIFR).
The paper, titled Independence and the Governance of Superannuation Funds and written by Dr Scott Donald and Suzanne Le Mire of the University of Adelaide, finds there is little empirical evidence that independence on superannuation boards would improve investment performance.
However, the authors suggest that independence on boards is important in maintaining the legitimacy of the superannuation system.
"The failure of the Federal government’s Superannuation Legislation Amendment (Trustee Governance) Bill 2015 to pass through the Senate in November 2015 means that the political spotlight has for the time being shifted away from the issue of independence on superannuation fund boards," said the paper.
"In some ways the failure of the Bill to pass the Senate was a blessing in disguise. It was poorly drafted, containing a number of unintended loopholes and areas of imprecision, as a result of which it was highly unlikely to achieve the objectives advanced for it by the government.
"The genie is, however, out of the bottle. The idea that existing regulatory measures designed to ensure that trustees place member needs first are inadequate, and that structural reforms are therefore required to buttress them, is unlikely to go away," it said.
"Moreover, the case for scrutinising the governance of superannuation funds holding $2 trillion of the retirement savings of Australians is a compelling one, irrespective of one’s political inclinations."
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