The $130 billion industry fund has warned that a new veto power allowing the Treasurer to ban any super fund investment or expenditure is “extreme in its breadth” and “not in keeping with a philosophy of free enterprise”.
“The respective Minister of the day may choose to prohibit investment assets arbitrarily, which could range from government sponsored infrastructure assets, to water rights, to certain food manufacturers (e.g. sugar or alcohol based) or certain energy sources, without regard to the entire portfolio,” Aware said in its submission to Treasury on the YFYS reforms.
“The contradiction inherent in the instruction is likely to lead to legal challenges and confusion as to interpretation of permitted investments or investment classes.”
The veto power has been the subject of criticism from a number of business and political groups, with shadow finance minister Stephen Jones warning that it could be “weaponised”. Despite that opposition, the veto power has appeared in an unaltered state in legislation currently tabled in Parliament.
“We are also concerned that payments to industry bodies, think tanks, market and employer organisations through which we engage with the business community as both investor and steward of employee savings could be impacted, and consequently weaken our ability to serve members’ best interests…We suggest these clauses are removed entirely from the draft legislation,” Aware said.
Aware also warned that new measures preventing underperforming funds from accepting new members “will not be sufficient” to protect disengaged members remaining in those funds.
“Taken together with the stapling measure as proposed, relying solely on disclosure will result in the most disengaged and vulnerable members being left in underperforming funds, while the fund’s position and viability deteriorate,” Aware said.
“There need to be stricter measures around underperformance to merge or move members to avoid problems of the ‘last person standing’ as laggard switchers are left in the failing fund.”
