Industry superannuation fund

In Australia, an industry superannuation fund[1] is a superannuation fund originally established to provide for the retirement of workers from a specific industry. Industry super funds are not-for-profit super funds. They are mutual funds, are membership-based and do not have shareholders. Many industry super funds are trade union-based. The main difference between industry super funds and retail super funds (or wholesale master trusts), which are public offer funds managed by financial institutions, is what happens with the profits. Retail funds distribute profits to shareholders or investors , ie., the trustee of the fund, while industrial funds return profits to members.

From 1 July 2005, choice of fund rules came into effect that gave Australian employees (with some exceptions) the option to choose the fund into which their employers paid their superannuation contributions. However, in practice, most workers (over 75%) remained with their employer’s default fund, which is more often than not an industry superannuation fund. Industry super funds were also no longer required to be industry specific and most became open to membership by a majority of workers in Australia. Such open funds are called public offer funds. Since 1 January 2014, unless an employee has chosen their own investment option, employers must pay all default Super Guarantee contributions into approved MySuper accounts, i.e. into super products that have received a MySuper authority. From that date, super funds must also credit employer contributions to a MySuper account where the member has not directed the trustee to do otherwise.

The Fair Work Commission determines which superannuation funds are suitable to be industry super funds and adopted by employers as default funds. Traditionally, such funds are not-for-profit funds.

Some of the best-known industry super funds are:[2]

ME Bank is owned by 26 industry super funds.[3] ME Bank obtained an Australian banking licence in July 2001 and was approved by APRA to act as an authorised deposit-taking institution, authorised to accept deposits from the public.

Retail super funds

The four major banks in Australia and other financial institutions own the majority of for-profit retail super funds and have been lobbying governments for legislative changes to de-regulate the process traditionally used to nominate workplace default funds and make it easier for employers to adopt a bank-owned fund. The Federal Abbott government has committed to opening up the default fund section system suggesting that doing so will generate greater competition.

As at July 2018, the major retail super funds were:

Testimony at the Hayne Royal Commission has spotlighted the actual and potential conflict of interest with bank-owned retail super funds, (for example, advisors being required to recommend bank financial products to members, which may not be in the best interest of the members[5]) and several banks have commenced processes to dispose of their wealth management divisions.[5]

History of industry super funds

Prior to 1992, superannuation was common, however there existed no national legislative requirement for employers to pay superannuation for their employees. Instead, industrial awards negotiated by the union movement provided for businesses to contribute to superannuation funds for and on behalf of their staff. This system was not uniform, and superannuation policies were tied to individual awards, which differed from industry to industry.

In 1992, the Keating Labor government introduced a compulsory ‘Superannuation Guarantee’ system as part of a major reform package to help relieve the growing burden on the taxpayer-funded government pension scheme. The change came about through a tripartite agreement between the government, employers and the trade unions. The trade unions agreed to forgo a national 3% pay increase which would be put into the new superannuation system for all employees in Australia. This was matched by employers' contributions which were set to increase over time.

Both union and employer organisations were keen to ensure that money invested into superannuation would be protected from high fees and commission products. This led to the establishment of trade union-based industry super funds, in competition to the established retail funds.

Today, industry funds are non-profit mutual funds with over 13 million accounts. Industry super funds have policies designed for the benefit of members, and governed by trustees representing employers and employees within the industry.

Industry Super Australia

Industry Super Australia (ISA) is a peak body for the industry superannuation sector. ISA has 16 members, all of which are not-for-profit industry super funds, and include AustralianSuper, Cbus, HESTA, Caresuper, HOSTPLUS and MTAA Super. The funds that are members of ISA hold nearly 6 million accounts.

ISA manages collective projects on behalf of fifteen industry super funds, including research, policy development, government relations and advocacy, as well as coordinating the Industry SuperFunds Joint Marketing Campaign. The Campaign is responsible for a number of prominent advertising and marketing campaigns on behalf of its membership including the long-running “Compare the Pair” television and press campaign.

The current Board of ISA comprises thirteen members and includes representatives from industry super funds, as well as former state and federal ministers and Premiers.

Consolidation of accounts

In September 2018 Industry Super Australia arranged a deal by 19 industry super funds to consolidate superannuation accounts of mutual members. The deal targets half a million low-balance inactive accounts, and could save members around $100 million a year in fees and life insurance premiums. The arrangement involves the 16 members of ISA, as well as REST, Equipsuper and First State Super.[6]

Inactive account containing less than $6,000 with one of these funds will be automatically rolled into a central consolidated pool, managed by an industry fund-owned, low-fee specialist fund called AUSFund, which will then run a check to see if there is an active account with one of those 19 funds, in which case the money will be automatically transferred into that fund free of charge.

Submissions and representations

Since ISA’s inception, it has made submissions to government on a number of superannuation-related topics including:

  • The Murray Inquiry (2014) into Australia’s financial systems, with particular reference to superannuation[7]
  • The Cooper Review (2010) into the superannuation system and regulatory improvements[8]
  • The Senate Standing Committee on Community Affairs covering the proposed tightening of pension eligibility[9]
  • The Trowbridge Review into potential conflicted remuneration and its effect on life insurance advice[10]
  • The Parliamentary Joint Committee on Corporations and Financial Systems Inquiry
  • The Senate Economics Legislation Committee (2013) review for streamlining the Future of Financial Advice Bill.[11]

Advertising campaigns

Industry superannuation funds in Australia have seen significant success through their advertising campaigns. Their 'compare the pair' campaign, which has run multiple iterations over many years, has achieved household recognition throughout Australia. The campaign is currently in its 3rd generation.[12]

gollark: Er, LoRaWAN.
gollark: Oh, you could use LoRa! I forgot about that. It runs over unlicensed ISM bands.
gollark: In the US you can't transmit encrypted signals over amateur bands IIRC.
gollark: There are lots of legal things involved and you need an amateur license.
gollark: cloud blockchain with artificial intelligence aspects

See also

References
  1. Industry Superannuation Funds Archived 2010-10-26 at the Wayback Machine Dead Link 4-8-17
  2. http://www.industrysuper.com/choose-a-fund/
  3. http://www.mebank.com.au/about-us/about-me/corporate-governance/#Shareholders
  4. Drummond, Shaun (31 March 2016). "ING Australia full-year profit rises 6pc on new customers". The Sydney Morning Herald. Fairfax Media. Retrieved 1 April 2016.
  5. The Age, 22 September 2018, Everything you need to know about the royal commission so far
  6. Industry super funds strike deal to solve multiple accounts problem
  7. "Financial System Inquiry". fsi.gov.au. Retrieved 2015-08-21.
  8. "Review into the Governance, Efficiency, Structure and Operation of Australia's Superannuation System". www.supersystemreview.gov.au. Archived from the original on 2015-03-19. Retrieved 2015-08-21. Dead Link
  9. "Senate Standing Committees on Community Affairs – Parliament of Australia". www.aph.gov.au. Retrieved 2015-08-21. Obfuscated by Age
  10. "Trowbridge Report" (PDF). Financial Services Council. Dead Link
  11. "Senate Economics Legislation Committee – Parliament of Australia". www.aph.gov.au. Retrieved 2015-08-21. Obfuscated by Age
  12. "Industry Super Unveils New 'Compare The Pair' Campaign". B&T. 2017-08-14. Retrieved 2019-08-28.
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