Superannuation policy before, during and after the election

Superannuation policy roundtable

Part 1: Superannuation policy before, during and after the election
Part 2: Can governments resist superannuation temptation?
Part 3: Income streams and where they lead
Part 4: What are the post-election priorities in superannuation?

The election has come and gone, but the super challenges confronting the old Government now rise up before the new. Industry leaders outline how government super policy must now evolve.

Mike Taylor, managing editor, Super Review: Welcome lady and gentlemen to the MetLife Super Review Roundtable, where we’re looking at policy before, during and after the election.

I’m going to kick things off by referencing what I think was one of the most significant announcements in the last few months, and that is the arrangement between the Financial Services Council and Industry Super Network, where you yourself, John [Brogden] and David Whiteley announced a relationship where you would develop policy together – or at least in consultation. 

That raised a few eyebrows I must admit. So I now throw to Pauline Vamos to start, because I figure that ASFA has a view on this as does AIST. So I think let’s put it out there on the table: what you have to say Pauline. 

Pauline Vamos, CEO, Association of Superannuation Funds of Australia (ASFA): I’m going to go big picture.

When everybody around this table thinks about the setting of superannuation policy, we think of three things: (1) It’s got to be long term so we can’t shoot from the hip; (2) it must be collaborative, so that across the industry we agree on more things than we don’t, but; (3) which is something we’ve been saying for quite some time – we just can’t talk to ourselves. 

We have so many stakeholders, so we have to engage those broader stakeholders and particularly as an industry engage them in a more formal way.  

I think one of the big issues that has been missing in the policy debate is the area of policy, and with such a frantic agenda I think we do forget that there are a number of policy areas that we not only have to drive but we have to fix and we have to think about. 

A lot of those require resources, they require a lot of research and they require a lot of deep thinking. And that can only be done with the expertise across the super sector and boarder.   

Where I want to take some of the discussion today is that we all talk about the design of the system, evolving it so that it does meet the ageing population; and the fact that it does interact with other policy areas like health care and aged care and the banking system. 

The operation of the system and the interoperatability of the system is one of the biggest issues we have at the moment in terms of SuperStream. We have the role of the pool in the economy: this is a big piece, particularly if we have a financial system review. 

We also have the regulatory approach, and what I mean by that are the issues around how should we be regulated and by whom?

We’ve got four regulators at the moment, way too many. There are gaps, there’s overlaps, and we pay a lot in levies that we see really no visibility or transparency on. 

Then last, but by no means least, is the consumer and employer experience.

Now together a number of the groups are talking and raising some initiatives around the Indigenous experience. But there are many other groups and areas of experience with the system that are not very good.

So this is where I think the policy debate should go – and it should be an adult debate and it’s not about big versus small, it’s not about one association or the other, it’s superannuation as a big piece, and it must collectively and collaboratively delivered. 

Mike Taylor, Super Review: John, as I guess someone who was front and centre in that dialogue with ISN, what’s your view of how wide the debate is and how wide the consultation is? 

John Brogden, chief executive, Financial Services Council: I’ve been in this job for four years and whilst it’s not about me, it’s been an interesting time to reflect for me.

Eight years ago I was asked to be the Chairman of Abacus, which was the new industry association bringing credit unions and building societies together. 

Now I thought North and South Korea would get together before building societies and credits unions – I mean these guys have been arguing for 50 or 60 years – but they had three industry associations and they agreed that coming together was the only way to go, and that has worked beneficially for them. None of us would argue, I think, Pauline, that there are too many voices. There are ... 

Pauline Vamos, ASFA: Way too many. 

John Brogden, Financial Services Council: Too many voices. 

Pauline Vamos, ASFA: On the same issue. 

John Brogden, Financial Services Council: Yeah, yeah true.

Ultimately it’s a matter for the member companies as to how that might change, but there’s no doubt that we diminish the industry by going to Canberra with either complete disagreements or more likely slight disagreements, which makes it look petty. 

So from our perspective the view on the FSC board it was time to probably time, in particular, to breach what was regarded as the biggest gap between the retail and industry funds. And it was particularly driven by the fact, if I can use this phrase, the war is over. 

We now have a legislative default product; even if there’s a change of government that will not change significantly.

We now have no commissions, they are gone. So a lot of the big battles that separated the two extreme ends of the industry, if I can use that phrase, have disappeared and the FSC’s broader membership base has ... industry funds. So it makes a lot of sense for us to be more broadly positioned. 

I don’t know what the industry association world’s going to look like in a couple of years but if it doesn’t get more joined – in whatever form you want to do that – I think we run a real risk, because Pauline has identified correctly there are some massive issues we can’t afford to be bickering over, that we can’t afford to be disagreeing over. 

Pauline Vamos, ASFA: But it’s also the duplication of resources. What we’ve seen in the last few years is massive duplication of resources. We deal with all of the bodies and its different people working on exactly the same issue. 

Now we’ve got structures in ASFA that must engage with all sectors, and that process is difficult and it is time consuming.

When you’ve got to then also add on the process of broader collaboration, it doubles the time and it doubles the resources.

So in my view, as an industry, bringing the sectors together, whether it’s committee structures, whether it’s through organisations, is one process. Then bringing that structure and that positioning to people outside the industry is more important. 

But I think there’s another gap as well, and the great example of this is the standard risk measure. The standard risk measure: ASFA was there as superannuation.

The FSC was there as an investment manager. We talked earlier today about the growing concerns and the developments around the insurance industry.

You’ve got the superannuation system, you’ve got the banking system, you’ve got the insurance industry, you’ve got the funds management industry.  

They all have a very close relationship with each other. To me, the representation of those bodies should be very clear, because I would love to have a conversation with [those involved] – so I have it with myself through my insurance committees on insurance.

I’d much prefer to go to the FSC and say, ‘let’s have a dialogue with the super industry, from fiduciary or asset owner hat to the insurer, what are we going to do there?’ 

The same with funds managers. I think, as I’ve said again to a lot of the ASFA members, we’ve got to have that discussion.

How do we structure as an industry?  As John said, it’s only the members that can say how we want to spend members money? 

As I’ve said again to a number of bodies, tell me you can stand up to a fund member and say, ‘you’re not paying twice for the same thing and you’ve got the best results in the last two years’ collaboration’. 

I think we’ve got to blow it apart and we’ve got to start from scratch. We’re starting from the position of ISN, FSC, AIST, ASFA. Let’s ignore that structure and think about what should we be delivering, and then work backwards – and that’s the message I’ve given to my board.

Let’s put everything on the table and work on what should be the mission, what should be the outcome, and then work backwards. It will take us two years to get there, but let’s start that conversation. 

Mike Taylor, Super Review: Alex Hutchison, you are a fund CEO. It’s not cheap being a member of any organisation these days, the fees are pretty high.

Where do you stand, and do you think there are too many organisations, and does it make it too hard to find the representation you want? 

Alex Hutchison, chief executive, Energy Industries Superannuation: Well Mike, I think that’s a very good point. Yes, there are too many organisations. I agree with what Pauline says. 

Recently I heard John in the FSC conference talk about the same issues and he made a very good point. He said, ‘I think that financial services is larger than the mining industry and also the agricultural industry in Australia, but they get a far louder voice in Canberra simply because they speak with one voice’. 

When it’s all said and done, it’s pretty much that simple. If I look at the individual associations, I think they’ve all got their own expertise.

But as a CEO when you’re writing up fees for each of your associations, you do scratch your head, as everybody in the industry has been doing for some years now, wondering, ‘Gee, I wish there was just one industry organisation that represented us’.

I’m very happy to hear what I’ve heard in this conversation and over the past year that everybody wants to achieve that aim. 

I think there are too many associations. I think the duplication in resourcing is a very good point, as Pauline said just a moment ago, in relation to too many people doing the same things.

So the quicker we can move to that structure where there is one voice [the better], because what we have in common, as John said the other day, is far more numerous than what divides us.

They’re key messages – and let’s frankly just get on with it. The sooner the better. I’d like to see one voice and one association, yes. 

Mike Taylor, Super Review: Russell, you’ve been in the industry a very long time and sat on association boards and helped organise conferencing, you’ve done all sorts of things ... 

Russell Mason, lead superannuation advisory partner, Deloitte: Yeah, it’s an unusual industry. The oldest fund is Harwood, that’s 123 years old this year, but at the same time it’s a very immature industry.

And really, you go back to the late ‘80s, early’90s when we had award super – and it was when the productivity super come in that the industry started to develop with any degree of seriousness.  

So it’s come a long way in a relatively short period of time. It’s got a long way to go. There are too many associations. There’s been too much bickering between associations. 

I think everybody has tried to take the high moral ground from time to time and there needs to be a realisation across all sectors that there is a place for self-managed funds.

There is a place for industry funds and there is a place for retail funds. There’s nothing wrong with retail funds having a profit motive. There’s nothing wrong with industry funds having union-appointed trustees. 

I think when various sectors and various people, spokespeople in the industry come to accept that, then I think we’ll see a lot of the bickering go away.

Self-managed funds will always suit a certain amount of people. And I have no problems with all those sectors existing as long as there’s not mis-selling or misinformation. 

I think as long as consumers are given the opportunity to make a balanced decision with whichever sector or whichever provider they go for, I don’t have a problem. I don’t think, certainly in my time, that I can see all the industry associations coming together.

I think that would be asking too much. It would be wonderful to see but I just can’t see it. And yes, you look at the powerful professions like the legal profession, the medical profession, and they tend to have one key body representing them. 

Someone gave the example of the mining industry – John – and it’s another great example of a powerful industry because it has one voice.  

I don’t think we’ll get there, but if the voices could have at least some degree of commonality between them, as Pauline and John in particular have said, and Alex about key policy issues, then that would be a step in the right direction. 

I think there are some fundamental issues, but as I deal with each of those associations there is a lot of common ground. I hear things that John says that Pauline would agree with, and that AIST or ISN would agree with. 

I think there’s a lot of common ground.

Too often we focus too much attention on the 10 per cent of disagreement between those organisations, when there’s some very well respected people like John and Pauline leading those organisations who do a tremendous amount of good work for the broader super industry and add so much to making it the industry it is today.

Again, we shouldn’t be too self-critical. It is a very good industry. We are the envy of most other countries in the world, and at times instead of beating ourselves up we should perhaps remember that we have got a good system.

It needs tinkering with like any system but we have got by world standards the Ferrari of superannuation pension fund systems. 

Mike Taylor, Super Review: Marc, as an insurer I think a point was made by one of our other speakers here, that when you’re dealing with the industry broadly and then you’re looking at the various associations, do you see merit in more commonality of voice and less, I guess, conflict in terms of political positions? 

Marc Lieberman, CEO, MetLife Australia: I certainly do. I don’t think it necessitates only one industry association.

I do think there is significant merit to more cooperation amongst industry associations and there is going to be a lot of overlap in terms of what we agree on. 

Being an insurer I have a specific area focus in dealing with superannuation funds, whether it’s the industry fund side or the corporate side or the multi-trust side, ASFA side.

So it’s important for me to understand where is ASFA on that in terms of what are they talking to funds about. 

As a director of the FSC it’s important for me to be across all of the FSC issues and how we represent ourselves and support the industry. But I think there is a lot of value to closer cooperation, closer communication. 

One of the challenges is, just like within the for-profit industry, we are somewhat in competition and although we are the envy of the world in terms of hedging markets – I absolutely believe that – we’re also still a small market, not from a dollar size but from an absolute size.   

So there is great competition, especially when you see issues or statements made that the super industry’s going to consolidate down to 70 funds, things like that. It creates this atmosphere of ‘you better be on top’. 

Well, it’s no different for industry associations. No industry association wants to be eliminated in the process and they don’t need to be, necessarily.

But there’s got to be that cooperation, there’s got to be that commonality, that communication so that we can as an industry speak with one voice.   

One of the things that Pauline said I think cuts to the real chase of it, and that’s we’ve got to stop talking to ourselves.

We’ve got to make sure that not only are we talking as an industry but we’re also talking to members and what’s important to members – how we truly represent them to the Government. Because if we’re representing just our own interests we’re not going to get any support from the people that really matter, which are the members.