The Financial Services Council (FSC) has sought to back its calls for changes to superannuation fund governance arrangements by claiming that some union officials are blocking fund mergers to protect union revenue streams.
In a submission to the Senate Economics Committee inquiry into the Superannuation Legislation Amendment (Trustee Governance) Bill 2015 the FSC specifically pointed to the failed merger between Equipsuper and VisionSuper.
It said that Equipsuper and Vision Super were finalising a merger to create a $10 billion superannuation fund with 160,000 members and the two super funds had been in merger talks for three years and undertaken expensive due diligence.
“The merger was scheduled to be complete in July 2012,” the FSC submission said.
“On the eve of the merger, however, Equipsuper pulled out. Equipsuper’s chair, Andrew Fairley, publicly cited Vision Super’s sponsoring unions’ and employer organisations’ inability to reach agreement on the number of seats each would receive on the board of the merged entity as the major roadblock to the merger.
“Board seats are an important source of revenue and influence to sponsoring organisations. In many instances the salary paid to the board member is paid back to the sponsoring organisation and helps fund their day-to-day activities. Sponsoring organisations therefore have an incentive to put their own interests ahead of the interest of the fund member.
“Unfortunately for consumers, the current board composition of superannuation funds is preventing consolidation and can inhibit achieving economies of scale.
“Independent directors would be expected to take a critical look at the operating costs of subscale funds and assess whether those funds are viable over the longer term. Whilst it should be expected that all trustee directors would undertake such analysis, there are examples of directors of superannuation funds putting the interests of their sponsoring organisation ahead of the interests of consumers.”
