AUSTRALIA’S $2.6 trillion superannuation industry is operating in darkness with no dedicated regulator watching the trustees running the funds, a royal commission has heard.
The financial services royal commission’s investigation into the superannuation industry wants to know: “What happens when we leave these trustees alone in the dark with our money?”
It is difficult, if not impossible, for Australians to detect if a trustee’s conduct has affected the amount they have left for retirement, the inquiry heard today.
Senior counsel assisting the commission Michael Hodge QC said there was no dedicated conduct regulator for superannuation trustees in Australia.
He said the Australian Prudential Regulation Authority was a prudential regulator and the Australian Securities and Investments Commission considered its jurisdiction in relation to superannuation trustees is limited.
“So if consumers are unable to do anything more than peer dimly through the darkness of their superannuation trustees, and there is no dedicated and active conduct regulator shining a spotlight on the trustees and searching out bad behaviour, that leaves us with the third possible safeguard of Australians’ retirement savings — reliance on compliance by the trustees themselves with their duties and legal obligations,” he said.
Mr Hodge said trustees had a duty to act in the best interests of members.
“But, of course, trustees are surrounded by temptation,” he said.
Examples of the temptation included to choose profit over the interests of members and to preference the interests of their sponsoring organisations.
Mr Hodge said questions for the commission included whether trustees could be trusted to do the right thing and, if they couldn’t, what must be done to protect Australians’ retirement savings.
The commission will devote more time to the conduct of retail funds than industry ones during the two-week public hearing, after examining documents produced by superannuation trustees.
Mr Hodge said certain industry funds had to produce credit card statements and documents from sponsoring unions or employer organisations.
“On the whole, it is our view that the commission’s review of documents identified fewer examples of types of conduct of the industry fund trustees that raise questions warranting oral consideration as to whether the conduct is misconduct or conduct falling below community standards or inappropriate use of retirement savings when compared with that of the retail funds that will appear in this round of hearings,” he said.
“In a number of cases, though certainly not all, the conduct of the industry funds which we have identified as warranting consideration during the oral hearings is very nuanced.” Representatives of industry fund CBUS will now not be questioned during the hearing, with statements be tendered instead.