Twenty years ago, superannuation was an employment benefit enjoyed only by public sector workers and management level employees in the corporate sector. Most workers had no access to superannuation.
Today “super” is an “industry” of great value and interest to finance capital. The $1.3 trillion in superannuation funds came in handy when the ongoing “great financial crisis” (GFC) began in 2008. It was a lifeline for Australian corporations caught short.
What happened to create this behemoth?
As part of the ALP-ACTU Accord, workers won the benefit of superannuation paid by the employer as a percentage of wages in industrial awards in 1986. Various “industry superannuation funds” were set up to administer them, for example Cbus for building workers.
The Superannuation Guarantee Act 1992 extended this provision for all workers, including the non-unionised, and mandated this benefit to be paid to their account in a licensed super fund.
Since that time, corporate funds, public sector funds and industry funds have been joined by the “retail funds”, produced by the finance/insurance industry and by DIY “self-managed superannuation funds”.
By 2009 the funds held by the industry funds had grown to $226 billion.
The means-tested Aged Pension, previously the major element of retirement income provision, remains as a safety net.
By 2009, 88% of all employees had super contributions paid on their behalf by their employer. Since superannuation has been outsourced to the private sector, this has constituted a rich source of continuous liquidity for the finance industry.
There was some tinkering by the Howard government while this expansion proceeded, but with 12 million super fund members (account holders), a comprehensive review was warranted. On July 5, former deputy chair of the Australian Securities and Investments Commission Jeremy Cooper handed the Report on Australian Superannuation to the Gillard government.
Cooper and seven other panel members drawn from the finance industry, reviewed the governance, efficiency, structure and operation of the Australian superannuation industry.
They did not delve into the strategic use of funds for “developing infrastructure or a more sustainable environment”. These they saw as “externalities” and “not ends in themselves”.
The rhetoric is that “the members interests are paramount”. Therefore, maximisation of return on investments and hence retirement incomes is the objective.
They have come up with a new regulatory framework to protect members’ interests. Free-for-all competition has failed to deliver the desirable outcomes, so regulation is necessary, particularly for the retail funds.
Most of the report’s recommendations are already practiced by the not-for-profit industry funds.
The report recommended:
• a default account option, “MySuper”, for the 80% of workers, who do not nominate an investment strategy, to make super simpler and cheaper;
• “choice” funds with some enhanced protections for those choosing their own investment strategy;
• an administration process, “Superstream”, with industry standardisation of data and transactions;
• new minimum standards to protect members’ interests such as better, more transparent communication allowing for comparisons between funds;and
• a ban on commissions; and enhanced capital reserves.
The report argues for mergers, recommending that the current 447 funds be cut to less than 100. The number of industry funds has already fallen from 124 in 2003 to 67 in 2009.
The most contentious proposal for the industry funds is a requirement that they appoint unelected “professional, independent directors” to replace some of the employee and employer directors industry fund boards are currently shared equally between. Both the Australian Chamber of Commerce and Industry and the ACTU have rejected this proposal. There was a time when public sector workers in NSW elected their representative on the State Superannuation Board.
The retail funds are keen to get access to the industry funds, and the report recommends the productivity commission examine the exclusive access of the industry funds to workers under the award system.
The Cooper Report, predictably wedded to the “market” as the means to the best outcomes, has a plethora of proposals to put the superannuation industry more fully into the hands of the finance plutocracy.
Brian Toohey commented in the July 10 Australian Financial Review: “Nothing can resolve the government’s core predicament on superannuation. It forces people to put their money into inherently risky financial markets on the implicit promise that this will deliver handsome returns in retirement.”
Superannuation is cited to show that Australia has become a “shareholder society” with most workers direct investors in the stock market.
The Cooper Report is an admission that this is not so. Most workers have voted with their feet for risk-free industry funds.
Many workers have been dudded by fee and commission gouging and by speculative investments in the share market.
Tying superannuation to casino capitalism is a form of corporate theft of workers’ savings justified by neoliberal dogmatism.
Superannuation needs to be incorporated into a national pension scheme that uses the enormous funds that would be accumulated to cheaply provide for our community’s needs.
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