Industry super funds use attack as the best form of defence

AustralianSuper industry super funds Australia Cbus
Australian Liberal MP and committee Chair Tim Wilson grilled AustralianSuper and Cbus chiefs over the companies’ controversial links.

Sometimes the best laid plans can go awry.

The idea was to summon industry super funds before the House of Representatives economics committee and then grill them about a series of embarrassing revelations.

And to a point that is exactly what happened, with Australia’s largest super fund AustralianSuper chief executive Ian Silk and Cbus head Justin Arter both facing some intense questioning from Liberal MP and committee chair Tim Wilson.

They were asked about their controversial links with the New Daily publication, which they partly bankroll through Industry Super Holdings.

The duo was also questioned about their investment in workforce management company Tandem that has entered voluntary administration after its subsidiary faced a multimillion-dollar class action around unpaid wages.

Tandem’s subsidiary has been the subject of a class action from Shine Lawyers that alleges it had breached Fair Work requirements for thousands of workers.

Mr Wilson said Tandem had “dudded contractors of their full entitlements”.

Won’t tolerate unethical behaviour

Mr Silk said AustralianSuper had been in contact with IFM about the situation at Tandem and had got an initial response, with a detailed briefing still to come.

“AustralianSuper’s board and organisation are concerned with any improper practices that occur in any organisations we are associated with if we are an investor into organisations accused of that behaviour,” Mr Silk said.

“It’s not just that half the board is comprised of union officials – it is inconsistent with the ethos of this organisation.’’

There had also been some changes to the provision of data to New Daily on an opt out basis after concerns were raised about data security.

Financial literacy and fund engagement important

However, Mr Silk strongly defended the links to New Daily, saying it helped to improve the financial literacy of members and also helped them to be more engaged with their super.

“From a survey of New Daily readers, 80% say they have an improved understanding of financial matters on the strength of reading the New Daily. The finance section is the second most read section after the news section.”

“This is not my personal view, these are the express views of AustralianSuper members.”

COVID super withdrawals will reduce benefits by hundreds of thousands

While there was some embarrassment for the industry super funds, the appearance before the committee also provided a platform for them to drive home the problems with the Federal Government’s voluntary super withdrawal for COVID-19 and indirectly boast about their investment performance.

More than $36.4 billion in superannuation savings were taken out under the early super release scheme during 2020, with many people taking more than $10,000 at the bottom of a market that has since delivered stellar, double-digit returns for super funds.

Cbus chief executive Justin Arter said 290,000 of their fund members drew down on their super, leaving those who took out $10,000 about $2,000 worse off given the fund’s 19% return for the 2020-21 year.

It paid out $2.3 billion in early super releases, meaning its members lost hundreds of millions of dollars in foregone gains by raiding their savings at the bottom of the market.

Mr Arter also pointed out that the early super release scheme was announced before JobKeeper, meaning many Australians had no other option at the time.

$5 billion withdrawn from AustralianSuper

Meanwhile, AustralianSuper’s Mr Silk told the committee that 464,000 members took out almost $5 billion in savings.

The fund achieved a 20.4% return in the 2020-21 financial year, meaning those who accessed the scheme missed out on even more gains than members of Cbus.

Mr Silk said there were members in “dire financial straits” who had no choice but to withdraw funds while another group simply wanted the cash.

“In the case of the latter category, the opportunity cost has been very significant,” he said.

“Around 21,000 members withdrew all of the money in their accounts.”

Using AustralianSuper’s 9.5% annual return over the past 10 years, someone who withdrew $10,000 from their super would have $377,000 less in their account after 40 years.

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