Govt urged to be agnostic on fund governance

Retail "for-profit" superannuation funds have more need for majority independent governance changes than their not-for profit counterparts, according to the Grattan Institute's Jim Minifie.

In a column to be published in the upcoming editions of Money Management and Super Review, Minifie, who directs the Productivity Growth Program at the Grattan Institute, has argued the super fund governance legislation being introduced to the Parliament his week can be defended by the Government but only if it avoids taking sides.

"Overall, the governance bill can be defended," he said. "It is what the Government does next that will show whether it is serious about improving member outcomes or is just taking sides in the perennial battle between union and for-profit super funds."

However, while Minifie points to the fact that not-for-profit funds have consistently out-performed their for profit counterparts, he also points to flaws in the not-for-profit of model of employer/employee representative boards.

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"...the representative fund model is not perfect," he said. "Employers are over-represented on such boards: most account holders are now on ‘defined contribution' plans that expose the employer to no financial risk."

Further, he said that, increasingly, fund members were not union members, and union representatives might have interests that did not align to those of their members.

"Anecdotally, some smaller funds do not have all the board expertise and depth they need. There have been a few frank governance failures: APRA [Australian Prudential Regulation Authority] has intervened to install independents more than once; a large IT project by an industry fund administrator failed; financial arrangements between funds and their linked unions have also raised eyebrows," Minifie said.