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Industry superannuation fund

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An industry superannuation fund is an Australian superannuation fund originally established to provide for the retirement of workers from a specific industry, but no longer industry-specific. They are not-for-profit, mutual funds which are membership-based and do not have shareholders. 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 (the trustees of the fund), while industry funds return profits to members.

Industry Super Australia (ISA) is "a research and advocacy body for Industry SuperFunds", the peak body of the industry.

From 1 July 2005, choice of fund rules came into effect, giving most Australian employees the option to choose the fund into which their employers paid their superannuation contributions. In practice, over 75% of workers remained with their employer’s default fund, which is usually an industry superannuation fund. From this time, industry super funds were also no longer required to be industry-specific, and most became open to membership by a majority of Australian workers. Such open funds are called public offer funds. Since 1 January 2014, employers must pay all default super guarantee contributions (minimum employer contributions) into approved MySuper accounts, unless an employee has chosen their own investment option. otherwise.

The Fair Work Commission determines which superannuation funds are suitable to be industry super funds and adopted by employers as default funds.

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

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. As of September 2020, ISA members are:[1]

Other well-known funds include:

ME Bank is owned by 26 industry super funds.[2] 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.

Industry Super Australia

Industry Super Australia (ISA) is "a research and advocacy body for Industry SuperFunds", which aims to make the most of the retirement savings of the individual members of its member funds.[3] It is a peak body for the industry superannuation sector. ISA has 15 members, including AustralianSuper, Hostplus and Cbus,[4] all of which are not-for-profit industry super funds. The funds that are members of ISA hold about five million accounts.[5]

As of September 2020 the Board of ISA comprises twelve members, including representatives from industry super funds, former state and federal ministers, ACTU Secretary Sally McManus, and others, under Chair Greg Combet.[6]

Advertising campaigns

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,[7] which has run multiple iterations over many years, has achieved household recognition throughout Australia. The campaign is currently in its 3rd generation.[8]

The "From little things" campaign used Paul Kelly and Kev Carmody's song "From Little Things, Big Things Grow"[9] from September 2009[10][11] until the end of 2014. After that, the Ben Lee song "We're All in This Together" would be used.[12]

Consolidation of accounts

In September 2018 Industry Super Australia arranged a deal by 19 industry super funds to consolidate superannuation accounts of all of their members. Involving half a million inactive accounts containing few funds, it may save members its members around A$100 million a year in what they would otherwise pay in fees and life insurance premiums. All members of ISA, as well as REST, Equipsuper and First State Super have signed up to the deal.[13]

All inactive accounts containing less than A$6,000 are now automatically rolled into a central pool, managed by a specialist fund called AUSFund. If any active accounts exist for the member in question with any of the funds, the money in the inactive account is automatically transferred into that fund.[13]

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[14]
  • The Cooper Review (2010) into the superannuation system and regulatory improvements[15]
  • The Senate Standing Committee on Community Affairs covering the proposed tightening of pension eligibility[16]
  • The Trowbridge Review into potential conflicted remuneration and its effect on life insurance advice[17]
  • 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.[18]

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.[citation needed]

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[20]) and several banks have commenced processes to dispose of their wealth management divisions.[20]

See also

References

  1. ^ "Choose an Industry SuperFund". Industry Super. 16 April 2020. Retrieved 6 September 2020.
  2. ^ MEBank. "About Us". ME Bank. Retrieved 6 September 2020.
  3. ^ Industry Super Australia (16 February 2018). "Treasury Laws Amendment (Taxation and Superannuation Guarantee Integrity Measures) Bill 2018: ISA Submission" (Document). {{cite document}}: Cite document requires |publisher= (help); Unknown parameter |access-date= ignored (help); Unknown parameter |url= ignored (help)
  4. ^ Cockburn, Gerard (24 July 2020). "Super funds calling for transparency from government". NewsComAu. Retrieved 6 September 2020.
  5. ^ "History". Industry SuperFunds. Retrieved 6 September 2020.
  6. ^ "Our board". Industry Super. 16 April 2020. Retrieved 6 September 2020.
  7. ^ "Industry Super set to launch new 'Compare the Pair' campaign". Industry Super Australia. Retrieved 6 September 2020.
  8. ^ "Industry Super Unveils New 'Compare The Pair' Campaign". B&T. 14 August 2017. Retrieved 28 August 2019.
  9. ^ "What happens when real people meet the finance system". Industry Super Australia. Retrieved 6 September 2020.
  10. ^ "From little things, big things grow". Campaign Brief. 3 September 2009. Retrieved 6 September 2020.
  11. ^ Taylor, Mike. "Industry funds launch new ad campaign". Money Management. Retrieved 6 September 2020.
  12. ^ Jones, Steve (23 October 2014). "Industry Superfunds kills off 'From Little Things' ad campaign soundtrack after five years". Mumbrella. Retrieved 6 September 2020.
  13. ^ a b Fernyhough, James (10 September 2018). "Industry funds strike deal to solve multiple accounts problem". The New Daily. Retrieved 6 September 2020.
  14. ^ "Financial System Inquiry". fsi.gov.au. Retrieved 21 August 2015.
  15. ^ "Review into the Governance, Efficiency, Structure and Operation of Australia's Superannuation System". www.supersystemreview.gov.au. Archived from the original on 19 March 2015. Retrieved 21 August 2015. Dead Link
  16. ^ "Senate Standing Committees on Community Affairs – Parliament of Australia". www.aph.gov.au. Retrieved 21 August 2015. Obfuscated by Age
  17. ^ "Trowbridge Report" (PDF). Financial Services Council. Dead Link
  18. ^ "Senate Economics Legislation Committee – Parliament of Australia". www.aph.gov.au. Retrieved 21 August 2015. Obfuscated by Age
  19. ^ 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.
  20. ^ a b The Age, 22 September 2018, Everything you need to know about the royal commission so far
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