For-profit super system failing Australians
The Royal Commission into the banking and finance sector has uncovered serious failings in Australia’s $600 billion retail super fund industry.
Meanwhile industry super funds which, unlike retail funds, do not operate for profit are emerging from the Commission without significant concerns with the handling of members’ investments.
Many industry super funds are governed by a board of trustees which includes union and employer representatives.
Early into proceedings about the super system, the Commission heard retail fund Colonial First State committed more than 15,000 offences by failing to move members from high-fee funds into low-fee MySuper accounts in accordance with legislation introduced by the former Gillard federal government.
In light of revelations in the Royal Commission, AMP announced it would compensate customers who ended up paying more in fees than they earned on cash investments.
In one example, an AMP customer who invested $100,000 in cash lost money due to fees.
Australian Council of Trade Unions (ACTU) Assistant Secretary Scott Connolly said the Commission had uncovered serious failings of Australian banks in relation to super including charging deceased customers for financial advice and deceiving financial regulators.
“Our retirement is too important to hand to companies and senior executives who rob the dead, deceive the regulator, rig markets, screw working people out of their homes, give dodgy advice, forge documents, abuse children’s saving programs and breach laws that stop people laundering money and financing terrorism,” Mr Connolly said.
“This Royal Commission still has more than six months to run, but purely on what we have seen so far, these institutions have no place providing superannuation products.
“It’s time to restrict the provision of superannuation to not-for-profit funds.”
Women continue to be worse off
While the Royal Commission has uncovered many failings in the regulation of the super system, the disadvantage faced by women due to the system’s design continues to be overlooked.
Research has found women retire with 47 per cent less super than men due to a range of factors including pay inequity, caring responsibilities and inequitable access to super concessions.
A recent Senate committee report ‘A Husband is Not a Retirement Plan’ made 19 recommendations to address gender inequity in the super system.
These recommendations included: removing the $450 minimum earning threshold, paying superannuation on parental leave payments, accelerating increasing the super guarantee to 12 percent, increasing paid parental leave from 18 weeks to 26, fixing the broken means-testing of the pension, making tax on super contributions fairer and ensuring tax concessions benefit low income earners.
IEUA-QNT Branch Secretary Terry Burke said the federal government’s response in dismissing these recommendations – and instead planning to extend the spouse offset on super contributions – was entirely inadequate.
“By dismissing the majority of the report’s valuable recommendations, the federal government is relegating Australian women to continuing financial inequity in retirement,” Mr Burke said.
“We need a drastic overhaul of the system to ensure a dignified, secure retirement for all working women.”