Policy & Research Archive

AIST Policy News

Fraser Review puts focus on profit-to-member ethos

Former Reserve Bank Governor and Treasury Secretary, Bernie Fraser, delivered his report into the governance of profit-to-member super funds in Canberra today.

The review - which was first commissioned in late 2015 - found profit-to-member superfunds’ governance model and member-first ethos is central to their persistent outperformance and avoidance of scandals affecting other parts of the finance sector.

The review found that the Government has not adequately made the case for a mandatory quota of independent directors and members’ interests will be better served through a focus on directors’ values, skills and expertise.

To this end Mr Fraser has recommended Australia’s profit to member superannuation funds prioritise values, skills and expertise in a mandatory principles-based governance code to commence on 1 July 2017.

As AIST members would be aware, such a code has been developed separately by AIST but in tandem with the Fraser review following a commitment made by AIST and Industry Super Australia to the Australian Senate. A draft of this code was circulated to all AIST members for feedback and consultation with the view to the code having a start date of 1, July 2017.

In an AIST media release on the draft code today, AIST CEO Tom Garcia said AIST’s code – modelled and built around the ASX Corporate Governance Principles - reinforced the importance of a member focus on the boards of super funds, which was in keeping with best practice governance.

Similarly, the Fraser report notes that the existing equal representation (of employers and employees) board model of Australia’s profit-to-member super funds is shared by leading international pension funds. It says the Australian profit-to-member super funds’ culture and values, considered strengths, are uniquely shaped by the local experience.

Looking to the future, Mr Fraser notes rapidly changing investment markets and political risks will challenge funds, and clear processes designed to deliver high quality boards with the right values and requisite skills and expertise will serve members’ interests best.

He recommends that the sector would benefit from a mandatory code of conduct that would take funds beyond current regulatory requirements to reflect best practice governance for representative trustee boards.

Key Fraser Review recommendations profit-to-member fund governance include:

  • Develop the AIST Fund Governance Framework for Not-For-Profit Superannuation Funds into mandatory code effective from July 1 2017.
  • Formalise director appointment standards to ensure new appointments have the appropriate culture and values and skills for strong oversight.
  • Improve professional, educational, cultural and gender board diversity.
  • Continue to operate under a majority representative trustee structure and clarify that all directors are independent of management; and the chair is the best candidate as determined by the board.
  • Improve accountability to members on governance issues through regular two way communication via annual general meetings or fund briefings.

AIST and ISA thank Bernie Fraser for his time and expertise in producing this report.

The AIST board will consider the report against the background of the final development of our code which will occur after AIST has received member feedback.

To provide your feedback on the draft code you can attend one of our member consultation meetings around the country, request a private briefing or send in your comments via email by 28 February 2017. You can also view AIST’s fact sheet on the code or contact our Executive Manager, Governance and Stewardship at escheerlinck@aist.asn.au or call 03 8677 3800 for further information.

Super objective: If it’s worth legislating, it’s worth doing properly

The Senate Economics Committee has backed the Government’s proposed super objective, despite concerns from key industry stakeholders, including AIST, that an objective for superannuation without an adequacy measure would be a missed opportunity.

The Government’s proposed objective for superannuation is “to provide income in retirement to substitute or supplement the Age Pension.”

In a dissenting report by Labor Senators, the senators said that if an objective was worth having it was worth doing properly. They expressed concern that the Government had failed to secure sufficient stakeholder support for their proposed objective or to achieve the broad political consensus recommended by Murray Financial System Inquiry.

Appearing before the Senate Committee this month, AIST’s Executive Manager, Policy and Research, David Haynes, voiced concern about a lack of industry consultation on the Government’s proposed objective, despite a high degree of consensus among industry stakeholders about a common objective definition.

AIST and the other peak bodies had strongly argued that for the objective to be meaningful and reflect the basis on which the super system was established – ie to enable Australians to enjoy a decent standard of living in retirement – that an adequacy measure should be included.

AIST also argued that robust methodology with clear benchmarks was needed to test whether super was meeting its objective and road-test policies against the objective.

Members requiring further information can contact AIST Executive Manager, Policy and Research, David Haynes at dhaynes@aist.asn.au

2016 Indigenous Super Summit report released

A report summarising the 2016 Indigenous Super Summit is now available.

The second Indigenous Superannuation Summit – an initiative of the Indigenous Superannuation Working Group – was held in Melbourne in early November. The Summit brought together government agencies, Aboriginal and Torres Strait Islander advocates and the superannuation industry in a spirit of cooperation.

A report of the day, including summaries of the discussions and outcomes is available in the Indigenous Super Summit Report. The Summit was proudly supported by Mercer.

Members seeking further information – including opportunities to get involved – should contact AIST Executive Manager, Governance & Stewardship, Eva Scheerlinck at escheerlinck@aist.asn.au