I personally think Industry Funds are great – for some people anyway.
I do have a few concerns about them though, namely:
Who Controls Industry Funds?
The Trustees of any super fund are the ones who make the decisions. Normally they would also be liable for the decisions, although that is not always the case as can be seen here.
In fact, as the Sydney Morning Herald reports here, Industry Fund trustees may not feel accountable because they don’t need to be. There is no requirement to even disclose the board or senior executive remuneration, or even a full set of audited accounts. They don’t even have an obligation to inform the people they represent and get paid from what investments they buy or sell, what price they got and whether it was sold to a conflicted party at fire sale values.
Personally I found this hard to believe so had a look at the most recent Annual Report (2010) for Australia’s largest Industry Super Fund – Australian Super. You can find the Annual Report here. On page 16 you will see the relevant details. Namely $127 million was spent in administration and operating expenses. As to how much of the operating expenses was paid to the trustees I have no idea – and neither do the super fund members. Likewise, how much of the members money was spent on advertising how industry funds pay no commissions and are “run only to benefit members”; again I have no idea. It does seem odd to me that an organisation can advertise how it is “run only to benefit the members” yet takes funds from these same members, in order to advertise to gain new members.
The other oddity is how Australian Super can claim to have “low fees” compared to retail superannuation funds when they use pretty much the same fund managers that retail funds use; Macquarie, Perpetual etc. I won’t digress though as my main point is whether Simon Crean really said what he did at the top of this article, and whether Unions have a vested interest?
I am really not too sure, but suggest you ask one of the trustees of Australian Super such as:
- Elana Rubin – Chair – Nominated by* the Australian Council of Trade Unions (ACTU)
- Brain Daley – Member Director – Nominated by* the Liquor, Hospitality and Miscellaneous Union (LHMU)
- Paul Howes – Member Director – Nominated by* the Australian Workers’ Union (AWU)
- Jeff Lawrence – Member Director – Nominated by* the Australian Council of Trade Unions (ACTU)
- Simone McGurk – Member Director – Nominated by* the Australian Council of Trade Unions (ACTU)
- Dave Oliver – Member Director – Nominated by* the Australian Manufacturing Workers’ Union (AMWU)
If you do manage to speak with any of them please try to find out what they get paid for being a trustee of ‘Australian Super’ and also how much of the members superannuation is being spent on advertising to recruit new members, which somehow benefits the existing members.
With all the talk about being open and transparent, these things really should be known.
* For your interest ‘Nominate’ implies the dictionary definition of “to put someone forward as a candidate for election”. In reality ‘Appointed’ would be the better word because there are no elections, and this is something most Industry funds are keen to enshrine, as can be witnessed here. A bit of a closed shop really.