Senate Moves Sees Inquiry Into NFP Super Funds

Industry Super Australia and the Australian Institute of Superannuation Trustees will commission a review by former RBA Governor and Treasury Secretary, Bernie Fraser, to develop a best practice governance code of conduct for Not for Profit super funds.

The review announcement comes as cross bench Senators voted against the Superannuation Legislation Amendment (Trustee Governance) which sought to have independent directors appointed to the Boards of industry superannuation funds.

Senators Jacqui Lambie, Glenn Lazarus, John Madigan and Nick Xenophon told Parliament the Bill went too far in attempting to change the governance structure of super funds, but called for an industry review of Not for Profit fund governance.

The industry peak bodies Industry Super Australia and the Australian Institute of Superannuation Trustees (AIST) said it had reacted quickly to establish a review that will assess global best practice pension fund governance and develop a Code of Conduct which would be mandatory for its member funds.

Bernie Fraser will lead a panel of governance experts including input from academics with specialist knowledge of global pension fund governance.

“Mr Fraser will oversee a review to formulate a rigorous governance code to ensure Not for Profit representative trustee funds continue to uphold the highest levels of governance, reflect the broad range of skills needed to retain a collaborative ‘all profits to members’ culture and ensure at all times that members’ interests are prioritised,” CEO of Industry Super Australia, David Whiteley, said.

"Bernie Fraser was one of the first independent trustees of industry super funds and is uniquely placed to lead this review. He understands what makes industry super funds tick, why they outperform, and what the foundation will be for their continued success for members.

"Not for Profit funds – including industry, government and corporate super funds – have one mission; to maximise the retirement savings of their eight million members.

"Industry super funds and other Not for Profits have led the way in realising the potential of Australia's pool of savings and transforming it into long term investment that delivers superior returns to members and drives economic growth. The investment beliefs held by representative trustees are the foundation of the success of the Not for Profit model.

"The code of conduct will preclude the need for legislation that would have dismantled the Not for Profit model of governance.”

CEO of AIST, Tom Garcia, said the development of a best practice governance code of conduct for Not for Profit super funds would ensure its members could continue to have confidence in the way their funds were run, while avoiding heavy handed regulation that was unlikely to improve super fund governance.

“It will mean that governance arrangements for all super funds are dealt with by industry codes,” Garcia said.

"This code is a win for mum and dads around the country who will continue to be strongly represented and have a voice at the board level of Not for Profit super funds.”

Shadow Minister for Superannuation, Jim Chalmers, said Labor welcomed the decision of cross bench Senators to reject the Turnbull Government’s unnecessary attacks on representative superannuation boards.

“We are pleased that the Senate cross bench has engaged with us and with the Bill objectively and on its merits and have concluded after long and thoughtful consideration that they will not support the Bill as it stands,” Chalmers said

Chalmers said the announcement of the review lead by Bernie Fraser was the best way forward for Australian workers and their retirement savings.

“The Government should abandon this ideological legislation and focus on the actual imperfections in the superannuation system, like the gender gap, adequacy for workers on modest incomes and employer compliance,” he said.

However, the Australian Institute of Company Directors said the move by the cross benches to oppose the government’s legislation had put the interests of unions and employer groups ahead of superannuation fund members.

“This decision rejects all tenants of good governance in the modern era. It defies common sense that unions and employer groups would deny their members the benefits of independence on their boards,” AICD Chief Executive Officer, John Brogden, said.

“Independent directors are widely recognised as a critical element of good corporate governance. The importance of independence is recognised in both the ASX Corporate Governance Council guidelines that apply to listed companies and the standards that the Australian Prudential Regulation Authority (APRA) imposes on banks and insurers.

"The industry review of governance standards that is now proposed by Industry Super Australia and the Australian Institute of Superannuation Trustees would need to be built on the foundation of internationally-accepted principles of governance, which includes the importance of director independence,” he said.