Australia launches government inquiry into superannuation funds
Australia’s AUD2.5trn (€1.6trn) superannuation industry has been dragged into a controversial government inquiry into the country’s financial services sector.
The decision by Australia’s government to include the superannuation industry in a Royal Commission inquiry caught the sector by surprise.
The inquiry, to be headed by retired High Court judge Kenneth Hayne, was originally intended to look into the banking sector – specifically the conduct of the country’s leading banks.
Some banks have been accused of rigging or manipulating the swap rate, while regulator Austrac earlier this year filed civil proceedings against the Commonwealth Bank of Australia, claiming it had breached money laundering rules.
The opposition Labor Party pushed for the inquiry, and after stonewalling for months, the government – led by prime minister Malcolm Turnbull – finally agreed to the Royal Commission inquiry last week, expanding its intended scope to include the superannuation sector.
The industry has argued that there is little relation between the specific areas of concern about the banks and the superannuation system.
The Royal Commission has specifically been asked to look at whether superannuation funds have used their members’ savings “for any purpose that does not meet community standards or expectations or is otherwise not in the best interests of members”.
Conservative-leaning politicians have previously criticised the union-run industry super funds – which controlled AUD545bn in members savings at the end of August 2017 – because of their alleged financial support for the Labor Party and a perceived lack of transparency.
The industry’s representative body, the Association of Superannuation Funds of Australia (ASFA), said it was disappointed that the government had included superannuation in the scope of the Royal Commission.
A plethora of never-ending inquiries, reviews and regulation was at odds with maintaining a system that had served Australians tremendously well, the ASFA said.
Research released by ASFA this week showed the pension funds were working well, with retirees having higher incomes and a smaller proportion of those aged over 65 relying solely on the state pension.
An increasing number of retirees had significant private income above the state pension level, the ASFA said, with many more able to achieve a comfortable standard of living in retirement.
“Superannuation fund members have access to redress in regard to any complaints against a fund, at no cost to the fund member,” the ASFA added.
The association said the sector had been subject to numerous inquiries in recent years and was closely supervised by a variety of regulators.
Peter Collins, chair of Industry Super Australia, a collaborative body, said that following a series of allegations and scandals within the banking system, the government’s decision to hold a Royal Commission into misconduct in the financial services industry was inevitable.
Even as it announced that the superannuation sector was included in the inquiry, the government was still planning to bring in wide-reaching reforms to tackle hidden payments in union-controlled funds.
However, this week, the sector scored a significant win when the government was forced to shelve the move to bring in further legislation, including forcing super funds to appoint independent board members.
The Royal Commission on financial services will have 12 months to conduct the inquiry and the final report is expected in February 2019.