The federal government has dumped long-standing plans to dilute union and employer group influence on industry super fund boards after the damage done to retail funds by the Hayne royal commission ended any prospect of securing Senate support.
The Australian Financial Review understands the decision to dump the policy was taken before the change of prime minister last week from Malcolm Turnbull to Scott Morrison.
The decision will not be reversed by the new Morrison regime, under which it remains unclear which minister will have responsibility for super.
In Sunday’s ministerial reshuffle, the cabinet portfolio of Revenue and Financial Services, held by Kelly O’Dwyer, was abolished and rolled into Treasury, now held by Josh Frydenberg.
Mr Frydenberg will be assisted by newly-promoted junior minister Stuart Robert, who is the new Assistant Treasurer.
Dutton backer and numbers man Zed Seselja was one of the few plotters not to have been dumped or demoted and he will serve as parliamentary secretary for Treasury and Finance.
But his duties are expected to be limited to the Australian Taxation Office and not big policy issues. Mr Frydenberg is yet to decide whether he or Mr Robert will control super.
Either way, the legislation pushed by Ms O’Dwyer that would have mandated one-third of independent directors for all super fund boards and is still before the Senate, has effectively been abandoned.
‘Too much heat’
“It’s policy in name only,” said a source.
“There was too much heat in it, there was no point pursuing it.
“On the back of the royal commission, it didn’t have a snowball’s chance in hell of passing.”
When the government relented and gave the green light for a banking royal commission, it included in the terms of reference the use of retirement savings for anything other than serving the best interests of members, in the belief industry funds would come under fire. But it was the retail funds that emerged with damaged reputations.
After a fortnight of hearings, the banking royal commission said it was open to Commissioner Kenneth Hayne to find NAB, Commonwealth Bank, AMP, IOOF, Suncorp and ANZ contravened superannuation and corporations law.
Some of the breaches carry criminal penalties. Retail super funds have been caught out charging fees for no service, keeping members in high-fee accounts and prioritising profits over members.
Industry funds have largely emerged unscathed, although counsel assisting has raised the prospect of a clampdown on spending on political advertising and corporate entertainment after evidence relating to AustralianSuper and Hostplus. The Coalition has been trying to pass legislation pretty much since 2014. It was Mr Frydenberg, who was assistant treasurer at the time, who first pushed the changes.
At the time, he claimed the ferocity with which Labor, unions and industry super funds had fought the government’s independent director laws showed “there is something to hide“.
Independence issue ‘toxic’
The government is, however, now clear to forge ahead in the Senate with a raft of super changes that were announced in the May budget. Their passage had been held up by ongoing debate over the company tax cuts for big business, which have also been dumped.
The super changes include banning all exit fees and restricting charges on super accounts that have less than $6000.
The government argued some industry funds are using industry lobby groups to undermine political support for the changes, which are designed to protect those starting out in work, and others, from relatively high super fees. The changes would save super accounts an estimated $612 million a year.
In December last year, Ms O’Dwyer pulled her legislation on the governance of boards after failing to muster enough crossbench support.
At the time, the chairman of the 2009 Super System Review, Jeremy Cooper, said the issue of independent directors on industry super funds was toxic, and he realised some time ago that change would take a decade.
He is among the many experts who support quotas for independent directors in line with world’s best practice.
“This issue is just so toxic,” Mr Cooper said. “When I closed the chapter on super governance, I thought to myself, it will be a 10-year exercise.”
A similar recommendation emerged from the 2014 Financial System Inquiry chaired by David Murray, although he recommended a majority of independent directors and an independent chairman.