While no one would suggest that the superannuation industry marked time in 2014, it is a year during which there was more talk than action. The final report of the Financial System Inquiry (FSI) will determine whether 2015 becomes a year of change for the sector.
Much rides on the recommendations contained in the final FSI report and the manner in which the Federal Government seeks to fit those recommendations into the policy agenda it intends implementing over the final 18 months of the current Parliament. However one thing is certain, the Government cannot hope to prosecute policy changes that will not be supported by the minor parties in the Senate.
And what the Government has already learned from the Senate’s disallowance of its Future of Financial Advice changes is that there are no guarantees about what the Government can hope to push through the upper house in circumstances where the industry funds movement represents a powerful and persuasive lobby group capable of mounting and maintaining highly effective campaigns.
But as the Super Review roundtable held at the recent Association of Superannuation Funds of Australia national conference has revealed, there are a number of changes which the Government could pursue which are likely to gain the support of a broad cross-section of the superannuation funds industry.
One of those changes relates to superannuation funds governance and the tightening of the rules to eliminate multiple board directorships. NGS Super trustee director and union official, John Quessy, reflected a widely held view when he suggested that multiple directorships created a bad look that was just too hard to explain.
The Government might also succeed in convincing enough independents in the Senate of the need to change superannuation governance arrangements to inject more “independent” directors onto boards. However, it will likely struggle in its attempts to open up the default funds sector to all eligible MySuper funds.
The momentum for changing super fund governance arrangements will be sustained by the findings of the Royal Commission into the building industry which has already pointed to some undesirable practices with respect to Cbus and the Construction Forestry Mining and Energy Union. Few of the independents in the Senate will be comfortable with being seen to ignore such findings.
Given the state of the Senate, it seems likely the Government will identify a range of changes for the superannuation industry flowing from the final recommendations of the FSI exercise, but will delay translating those changes into legislation and regulation until after the next Federal Election.
That means that the superannuation industry will have nearly two years to bed down the final elements of Stronger Super while assessing what it needs to do to accommodate any of the changes likely to flow from the FSI recommendations, assuming a Coalition Government is returned to the Treasury benches in Canberra.
Given the state of the polls as the Government closes out 2014, superannuation is unlikely to be regarded as a priority policy issue and vote-winner. Rather, the Government is likely to spend much of 2015 seeking to get on the front foot with its broader economic policy ahead of an election-centric Budget in 2016.
So for better or for worse, 2015 looks likely to be a year of further consolidation for the superannuation industry and an opportunity to examine the FSI recommendations safe in the knowledge that the implementation time-frames will be made to fit with the Federal Election cycle.
