Speaking to the Senate economics legislation committee, Ian Silk pulled no punches in his description of the new investment veto powers included in the YFYS legislation.
“There are elements of this provision that are frankly bizarre and entirely unjustified…the fact that there’s the overt and express provision for the Parliament to intrude upon the decision-making process of superannuation funds that already have significant regulatory oversight by virtue of a number of different regulators – it’s impossible to see what the rationale for this is,” he said.
Mr Silk also warned that the reforms would introduce sovereign risk to the $3 trillion superannuation sector for the first time, with international investors potentially thinking twice about partnering with a fund due to fears that “politicians might override a decision to enter a contract that’s been made in good faith”.
“The fact that it can be exercised against decisions that have been made in the best financial interests of members suggests that there’s an opportunity at least for a very capricious use of this power. There’s no clear case made out for why this is being introduced,” Mr Silk said.
“To introduce something as extraordinary as this I would have thought justified an extensive explanation and justification, but there is none. It’s as much as anything the unknown element of this – the details are apparently going to be covered in regulations, so we don’t know the criteria that will be applied to the use of this power.”
Mr Silk said that there was no materiality test applied to the powers and that he had been advised that similar veto powers were usually only for “terrorism legislation”.
“Superannuation decision making is now going to be regarded in the same breath as terrorism offences – it’s quite extraordinary,” he said.
“The whole provision smacks of ideological fervour gone absolutely mad.”