Senator Andrew Bragg is calling for greater scrutiny of how superannuation funds spend members' money, slamming the system that has enjoyed three decades of unquestioned opacity.
Appearing at an Association of Superannuation Funds of Australia event, in which he engaged in a political debate with Labor member Daniel Mulino, Bragg criticised the level of self-interest both retail and industry funds have exhibited over the last 28 years or so under a system that has operated as "one big silo".
The Hayne Royal Commission exposed retail funds acting in their best interest, while the COVID-19 crisis showed industry funds acting and furthering in their own self-interest, he said.
The New South Wales Senator proposed a roadmap to fix the system in three ways by: setting a clear objective of what superannuation wants to achieve; improving transparency of how members' money is spent; and lowering fees.
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He slammed super funds for not disclosing related-party payments made to trade unions for example, which are set to profit $31 million over a decade. He was particularly critical of Industry Super Australia spending $40 million last year on advertising.
ISA told Financial Standard in the past that it has not increased its marketing budget over the years (as at 18 March 2019) and declined to disclose what that exact figure was.
Bragg wants to see better governance in how members' money is spent, pointing to how such conduct is failing the Sole Purpose Test.
While Bragg insists that he does not want to upend or abolish the entire system, he would rather see members get "more bang for their buck", fees lowered by at least half and transparency improved.
These are the bigger questions the industry should focus on rather than increasing the contribution rate, he added.
Bragg recently released a book, Bad Egg: How to Fix Super, outlining many of these points, one of which is allowing members, especially those who earn lower incomes, to use their super to purchase their first home.
Mulino said that such a proposal "takes away the integrity of the scheme" and, together with the early release of super scheme, denies the benefits of compound interest, particularly for young members.
"Invariably it is going [to be young people] who will potentially get the benefit of earlier access to their first home, but the price they pay in terms of missing out on a lifetime of compound interest is just too high," Mulino said.
"The system should evolve to cater to diverse needs. Almost no other sector works with a static set of laws from three decades ago and the industry ought to look at reform as an opportunity to become sustainable," Bragg wrote.