Super funds rank poorly for disclosure

According to the Melbourne Mercer Global Pension Index – a global ranking of all pension and retirement systems – Australia’s superannuation system ranked second internationally as at October 2011. This ranking was reflective of both investment performance and the effectiveness of each system for its members.

Whilst this ranking is encouraging, the results are less than impressive when our super system is compared to other schemes in terms of disclosure and governance. In this regard, Australia’s superannuation system trails those of all other countries.

Fortunately, the Gillard government have recognised the deficiencies in our system and the Minister for Financial Services and Superannuation, Bill Shorten, has set about implementing industry-wide standards.

As it stands now, super funds are not required to disclose the salaries paid to directors, senior executives or fund managers, nor are they required to disclose other benefits they might receive. Because of this, conflicts of interest almost certainly exist. Moreover, if you compare the annual reports of not-for profit super funds (i.e. industry funds) where a similar amount of funds are under management, you will find that salaries paid to directors can vary by around 30 per cent and fees for attendance at board meetings can range from $250 to more than $6,000.

Additionally, there are very few rules on board composition at present which again gives rise to conflicts of interest (e.g. it is possible to be a board member on more than one fund simultaneously) and funds are only required to provide minimal detail with regard to investment holdings.

Minister Shorten promises to address these issues in what will be the biggest shake-up in the super industry since employer contributions became compulsory in 1992.

Industry groups back Shorten’s planned changes, but want them to apply to both industry and retail funds.

The new standards will be similar to those applying to listed companies. Federal Parliament is considering Shorten’s proposal right now and it is expected they will be implemented in their current form.

 


This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial and tax advice prior to acting on this information.Opinions constitute our judgement at the time of issue and are subject to change. Financial Planning Expert Pty Ltd does not give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.
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