The boss of Australia’s biggest super fund, AustralianSuper, has questioned whether changes to laws governing the sector proposed by the treasurer, Josh Frydenberg, are genuinely directed at improving retirement savings.
Speaking as Aussie Super reached a new high of $200bn in funds under management, chief executive Ian Silk said many attacks on the industry super sector were “basically politically motivated by people looking to give themselves a bit of profile, in the hope of advancement”.
Industry super funds have also raised concerns that a potential ban on advertising as part of a new “best financial interests” test on spending by funds could leave savers stuck in “crap” for-profit funds, while trustees are worried that many retail funds will be left out of new performance tests.
Silk said the changes, part of Frydenberg’s “Your Money, Your Super” package, appeared to have “laudable” aims but he was concerned about a provision of the proposed best financial interests test that would reverse the onus of proof if fund trustees were taken to court for breaching it.
“So funds have to prove that every dollar they spend is in the best financial interests of members, rather than a regulator having to prove the contrary,” Silk said.
He said he was also concerned that the law gave the government the ability to “prohibit a fund spending money on things that are in the best financial interests of members”.
“So, a whole sort of potpourri of measures here, which don’t give you confidence that that particular measure is directed to the laudable public policy objective that is said to be behind it.”
In recent months a group of government backbenchers, including longtime critic and New South Wales senator Andrew Bragg, have launched a fresh series of attacks on the industry sector, where funds are jointly controlled by unions and employer groups.
Battles have erupted over raising employer contributions from 9.5% of wages – an increase is due by law next year but the government has publicly mulled ditching it – as well as the fees paid by members and payments by super funds to unions and union-linked bodies for directors’ fees and marketing.
Silk told Guardian Australia there were two possible explanations for the attacks.
“One is, people look at the super industry and say, on its merits, it can be improved, and these are some of the deficiencies in the system,” he said. “The other one is that it’s a politically motivated attack, coming from people who don’t support compulsory superannuation.”
He said the super system worked well but there were plenty of opportunities available to improve it.
“But most of the criticisms that you mentioned don’t really get to the substance of the operation of the system.”
Silk said Aussie Super responded to attacks by putting “facts on the table”. “But the most important way, most meaningful way, is to continue to perform well,” he said.
“It sounds trite and bland as a response to what I’ve seen as politically motivated attacks, but most of our members have got no interest in the political view of super, they’re interested in how much they get to retire with, what’s the income stream they can get out of this super.”
He pointed to Aussie Super’s status as the best-performing fund over five, 10 and 15 years.
Its size has also enabled it to slash fees over the past 10 years by bringing in-house many activities funds have traditionally paid other financial groups to do.
“We saved $200m, that we would have otherwise paid to external managers, by virtue of our internal program team,” he said. “This is really what industry funds should be about.”
Aussie Super increased its size by $25bn over the past six months despite the pandemic and Frydenberg’s decision to allow people hit by the crisis to withdraw up to $20,000 from their retirement savings.
Silk said this had been accomplished by people “voting with their feet” and changing from poorly performing retail funds, something he said had been going on since the banking royal commission in 2018.
He said the important thing about hitting $200bn was not the number itself but what it enabled the fund to do to make members money.
“If I was a commercial fund manager, I’d say, thank you very much, terrific,” he said. “But as a profit-for-member mutual, we genuinely don’t see it as an achievement per se – it’s a noteworthy milestone, clearly, I don’t want to be a smart-arse about it.
“There’s a job to be done that requires 100% focus on other people’s money, and if other people join them, and that helps you do the job well. Well, that’s a good thing.”
Silk has run Aussie Super for 14 years – a long time atop any organisation in corporate Australia. Asked if he planned to continue in the job, he said: “I speak with the board about succession planning. But for the moment to answer your question, yes.”