Appearing in the stand yesterday, AustralianSuper’s Ian Silk has been the most high profile and sanguine witness to appear in this round of hearings, answering questions and even cracking jokes.
However, as he explained to the commission, AustralianSuper finds little comedy in banks’ interests in superannuation.
Responding to questioning around the fox in the henhouse ads put out in 2017, he said the intent was to position industry funds as against the banks, which were at the time lobbying for weaker employee protections.
“The purpose of the advertisement was to … prevent the lobbying effort that was being undertaken by retail wealth management companies, in particular the big banks, to change the default system from a framework that we say provided significant protection for workers to one that exposed workers to significant risks of misselling, cross-selling and conflicts of interest that would have done them significant damage,” Mr Silk said.
As it stands, most awards and enterprise agreements will have a superannuation clause identifying a number of funds from which employers can select the default fund, with a negotiation process between unions, funds and employers usually attached.
“The proposal was to essentially strip superannuation from the industrial system and allow employers the unfettered right to choose the default fund that would apply at their workplace,” he continued, arguing this would likely see banks leverage their relationships with employers to push them to choose bank-owned funds as the default.
“The misselling, the cross-selling, the conflict of interests in particular that would apply through that model present a situation where the very great likelihood, indeed, the express design objective of such a change, would be to see millions of Australians that would otherwise be in higher performing industry funds in poorer performing retail funds.”
Mr Silk said this would have a two-fold detriment; existing AusSuper members would lose the economy of scale as the flow of members entering the fund diminishes, while those who join retail funds will likely suffer poorer returns.
The ad wasn’t directed at any specific legislation, rather to address the “dramatic” increase in the political temperature around the issue. It was targeted at federal politicians directly and through their constituents, he added.
“The ultimate purpose was to ensure that legislation was not passed that would diminish the financial outcomes of superannuation fund members, in particular AustralianSuper members. So in that sense, the ultimate test is whether legislation passed,” Mr Silk said.
The royal commission hearings continue today, with IOOF boss Chris Kelaher in the hot-seat. You can follow our live-blog here.