You may have seen that in The Australian today we're letting people know that our trustee system is not only the envy of the world, but an economic and public policy success story that has bipartisan and community-wide support.
Arguably it is its compulsory nature that has made super what it is today. This reflects the recognition by policymakers and the community that many Australians, if not most, would not adequately save for their retirement unless compelled to do so.
With compulsion comes a higher duty of care for trustees of super funds and for policymakers designing regulatory frameworks. In particular, policymakers need to ensure the system is competitive and does not protect poor performers. In the case of default-fund superannuation, competition must come in the form of long-term net investment returns.
The same pursuit of excellence extends to the governance of the super system.
Industry super funds have the representative trustee model.
This is a feature of superannuation (or pensions) systems across all OECD countries. Implicit is the assumption that superannuation is not just a discretionary financial product, like a credit card or personal loan, and managing retirement income systems is too economically important for the traditional finance sector to be handed sole responsibility.
The evidence is that funds with the representative trustee system, including in Australia, outperform other types of super funds, typically run by banks and insurance companies.
In Australia this outperformance has been significant: more than 2 per cent a year across the past 16 years to June30 last year (the latest data), according to the Australian Prudential Regulation Authority.
Recently the government has launched a discussion paper relating to super default funds and fund governance. The Financial Services Council, representing retail funds, typically owned by banks, has suggested that the representative trustee model should be dropped and "all profit to member" funds should adopt the governance model of banks and insurers.
Industry Super Australia believes this would be a mistake.
Moving to a homogenous governance structure, based on the banks, would diminish competition and lead to lower member returns and national savings. Industry super funds have been constant in forcing banks, through competition, to improve their offerings to the public. Banks may not welcome the competition but it has demonstrably improved retirement incomes policy and member outcomes.
Homogenous governance structures also would reduce necessary debate about the future of our retirement incomes system. Industry super funds have always been at the forefront of advocacy for their members.
What is most important for members is that trustee directors have the expertise and loyalty to effectively act as their agents. This certainly does not preclude independent trustees on boards. Many industry super funds have independent chairmen and trustees. Independent trustee directors can add, and have added, diversity of thinking, a fresh approach and new ideas. They also have become some of the strongest advocates of the representative trustee system.
The representative trustee system is an example of enduring consensus between employers and unions, delivering for Australians.
It is time for recognition of how the trustee system has in fact been the competitive advantage of industry super funds. Industry super funds have delivered better returns to members, campaigned to improve the super system and invested strongly in nation building infrastructure.
David Whiteley
Chief Executive
Industry Super Australia