You may have heard or read about the Federal Government’s plans for changes to superannuation funds. If the proposals become law, they’ll require industry super funds, like AustralianSuper, to restructure. And they could change the way many Australians join super funds and invest for their retirement, while also limiting the information some funds have to provide members and prospective members.

The government claims they are necessary to improve governance of super funds, and to enhance accountability and transparency across the sector.

Although every employee belongs to a super fund, many don’t spend much time looking into the details of the super sector or the relative differences between the industry and retail funds.

But this distinction is important when considering what these changes mean for industry fund members and their super balances. And it’s also relevant to the way the proposals could affect the decisions some employees and employers make about which super funds they join.

The Government wants all super funds to have boards that contain one-third of all directors who are independent – that is, drawn from neither employers nor employees. This would change most industry super fund boards, including AustralianSuper. Industry funds generally have a 50-50 representation model, with board members representing an equal share of employers and employees.

That contrasts with the way that the retail super funds, which are owned by the banks and other financial institutions, organise their boards. They are not built on a co-operative, stakeholder model. Their board members and trustees are generally appointed by their corporate parent and thus they are all regarded as independent.

The Government also wants to reduce the number of people signed up by default to specific super funds based on industrial agreements at their workplaces. It says it wants these workers to have a greater choice of super funds rather than seeing them directed into a fund automatically. At this stage, the appropriate model to do this hasn’t been decided. There has also been no decision on how to determine which funds are the best funds for people to choose from.

This change could mean that the retail funds would have more opportunities to promote their products to industry super fund members and new employees. Employers would be required to co-operate with funds looking for this new business, and they could be persuaded to switch from industry to retail funds.

Another change covers the amount of information that super funds are legally obliged to give members. Because our fund is a straightforward super fund, we’re required by law to disclose all direct and indirect costs. This applies to all industry funds. These requirements don’t apply the same way for retail funds investing via platforms – They typically invest using a more complex investment structure. The regulator has exempted platform products from the disclosure requirements that typically apply to industry funds.

This is the second time the Government has tried to legislate these changes. It tried two years ago but could not secure enough support to get them through the Senate. Now, it is trying again. As before, the Industry super funds, including AustralianSuper, do not believe these proposals will help our members.

We believe changes to our boards are unnecessary and could actually harm our members’ super. We are dedicated to the co-operative model. Currently, employer and employee representative directors already act independently of their other interests when sitting on a superannuation fund board. During the last 10 years the average retail fund, with its independent-director model, has delivered around $15,000 less to its members than the average industry super fund*.

We also believe there is currently sufficient choice of funds for workers and businesses. The government’s proposals do not carry requirements for retail funds to provide information to their prospective customers on the comparative performances of their fund and other funds. Several academic studies suggest that when members choose their own fund, they opt for retail funds that have relatively lower performance and higher feesϮ.

We argue for full disclosure of costs by all super funds, including the platform products offered by the retail funds. We embrace our legal obligation to disclose all costs, which we firmly believe is in the best interests of everyone. Without the investment model used by retail funds facing the same obligation, you can’t compare apples with apples when deciding between industry funds and the retail funds who invest via platforms. You can’t compare fees at a glance because platforms disclose fees in a different way and don’t disclose all costs. Full transparency of fees and costs will help members choose a fund that doesn’t erode their super balance with high fees.

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Ϯ ISA submission on Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017.