Industry funds and trade unions
It says something about the antecedents of Australia's so-called "industry" superannuation funds that their relationship to trade unions warranted an entire chapter in the discussion paper generated by the Royal Commission into Trade Union Governance and Corruption.
It also says something about the trade union origins of most industry funds and the nature of the Royal Commission itself, that the chapter dealing with superannuation starts with the statement: "The potential for coercive conduct and conflicts of interest in enterprise bargaining identified in respect of employee benefit funds also exists in respect of superannuation funds. This is because of the institutional links between trade unions and industry superannuation funds".
The Royal Commission's approach to trade unions and industry superannuation raises a number of questions which go straight to the heart of concerns expressed by Coalition politicians, not least superannuation fund governance and the role of the industrial relations judiciary.
In many respects the discussion paper and some of its observations point to a future Coalition Government legislating to impose changes which would effectively alter governance arrangements and remove superannuation from the oversight of the industrial relations judiciary.
In particular, the discussion paper reinforces the findings of the Financial System Inquiry (FSI) that there is no good reason why workers covered by awards or enterprise agreements should be denied choice of fund.
In other words, the Royal Commission is lending its weight to calls for changes to be made to the default superannuation fund regime.
It goes on to state: "Separate from the question of choice of superannuation fund is whether unions should be able to negotiate for terms in an enterprise agreement which specify a specific default superannuation fund with financial links with the union negotiating the agreement".
"On the one hand, preventing the union specifying a particular fund as a default would reduce the problems of potential coercion and conflicts of interest. On the other, superannuation is compulsory and the particular industry superannuation fund with which the union is associated may provide a good return for members," it said.
For all of the above reasons, the discussion paper makes interesting reading for financial planners, particularly those who have rankled against the Industry Super Australia's (ISA's) long-running "compare the pair" advertising campaign and the influence perceived to have been exerted by industry funds on the former Labor Government.
These planners will therefore have nodded sagely at the Royal Commission's statement, "industry superannuation funds pay substantial sums to the unions with which they are associated including directors' fees, reimbursement of director's expenses, office rental, advertising expenses and sponsorship".
They will also have felt comforted by the Royal Commission's citing of the example of TWUSuper for the 2007 to 2014 financial years during which it said the super fund "paid in excess of $6 million to the TWU and its branches."
The Royal Commission discussion document actually went to the trouble of separating out superannuation funds from the so-called "employee benefit funds" run by trade unions because of superannuation's unique nature - "namely that it is compulsory".
Having campaigned strongly for the Government to change the default funds under modern award regime to allow the selection of any Australian Prudential Regulation Authority (APRA)-approved MySuper fund, the Financial Services Council can be expected to seek to leverage the statements contained in the Royal Commission discussion paper.
This much was indicated by the FSC's head of policy, Andrew Bragg, who almost immediately pointed to the statement: "Industry superannuation funds pay substantial funds to the unions".
Many people looked to the Government utilising changes to the Corporations Act and the Superannuation Industry (Supervision) Act to exact change to the industry superannuation funds regime. It now seems obvious that the vehicle for change will be the final recommendations of the Royal Commission.
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