The chief executive of Australia’s largest super fund, AustralianSuper, defended its investment in The New Daily, an online news publication, in a government hearing yesterday.
Ian Silk, making his much anticipated appearance before the Royal Commission inquiring into Australia’s financial services sector, was also questioned about an industry advertising campaign known as ‘fox in the henhouse’.
The focus on these issues comes as the Commission probes industry superannuation funds’ use of members’ fees, in response to concerns they are being inappropriately used for political activities.
The New Daily was set up in 2013 with money from industry superannuation funds. AustralianSuper put in AUD2m (€1.3m), handing over its stake to Industry Super Holdings a few years later at no cost.
Silk, who has been CEO of the AUD140bn super fund since 2006, said the investment in the service was part of a multi-pronged marketing strategy to retain members and attract new members.
“In AustralianSuper’s case, more than 200,000 members leave the fund each year, which means that we need to replace those members,” he told the Commission.
Silk described The New Daily service as a “voice for superannuation” and a tool to improve the numeracy and literacy of the average super fund member.
He said it was not “a thoughtless cheerleader for industry funds” but that “where there are merits of those funds, and where people are best serviced by being members of those funds, we think it’s important to point those features out to people”.
Foxes, hens, and default choices
AustralianSuper also contributed to the production and airing of the ‘fox in the henhouse’ campaign, which was created for the industry superannuation funds’ trade association and attacked big banks’ lobbying over superannuation rule changes.
The ad was first aired in 2017.
When asked by Michael Hodge, counsel assisting the Commission, about the target audience of the advertising series, Silk said the ultimate target was lawmakers – members of parliament.
“The purpose of the advertisement was […] to prevent the lobbying effort that was being undertaken by retail wealth management companies, in particular the big banks, to change the default system,” he said.
Retail super funds – owned by banks – have been losing ground due to poor performance and high fees, and have been lobbying to abolish the default system to completely open up the market.
Silk told the Commission: “Some employers have a number of default funds to apply in relation to different cohorts of workers, and an employer will typically select the default fund or funds to apply at their work from a selection available to them or the only option available to them through an industrial instrument, in particular, an industrial award, or an enterprise agreement.”
He said that most superannuation contributions turn out to be default contributions, making the choice of the default fund a very important one.
AustralianSuper, created from the merger of three funds in 2006, has more than 2 million members.
Hodge started the hearing with questions about AustralianSuper’s board composition and appointment of directors, including independent directors.
Silk said the board’s priority was to have “the optimum composition of the board and the optimum structuring of the board”.
The Royal Commission has summoned some 20 retail and industry funds to appear at what is round five of the hearing, which started on Monday.
Earlier this week it quizzed AustralianSuper about its investment in Pacific Hydro, a renewable energy company