Ross Greenwood speaks to Martin Fahy, CEO of The Association of Superannuation Funds of Australia, about why they are upset superannuation has been included in the Royal Commission into banking, superannuation and the financial services industries.
Introduction: Why have Super Funds been dragged into the banking Royal Commission?
Ross Greenwood: Now the other aspect of this particular Royal Commission and this is important also is that it’s for all financial services and that includes Superannuation. Do bear in mind there are some 2 trillion dollars of Australian savings inside Superannuation funds, and Superannuation it would be fair to say is not happy to have been drawn into this. Now, I’m joined by the chief executive of The Association of Superannuation Funds in Australia doctor Martin Fahy who joins me now, many thanks to your time Martin.
Interview with: Martin Fahy, CEO, The Association of Superannuation Funds of Australia
Martin Fahy: Good to talk to you, Ross.
Ross Greenwood: In this regard are you disappointed that Superannuation is included in this Royal Commission?
Martin Fahy: Ross, we are very disappointed we’ve had numerous reviews into Superannuation for the last 10 to 15 years. The system is ranked the top three in the world and we know that Australians are confident in Superannuation, this is really a huge distraction for the industry. I think it’s seen as being part of the widest financial services and ended the political pragmatism of the day is called sweep up.
Ross Greenwood: So from that point of view, is there nothing that needs to be investigated? Perhaps even the use of members’ funds with the sponsorship payments to unions, other types of sponsorship might be appropriate or not appropriate or even the primitive directors?
Martin Fahy: We have laws here is a very, very heavily regulated Superannuation sector, we’ve got regulation coming from Prudential side by APRA. We’ve regulation coming from ASIC but we also have the ATO who run the payments in super stream aspects all this there are world-class regulators and we haven’t had any evidence or systemic shortcomings in terms of Superannuation funds.
They already operate under what’s called a C-sect which requires them to act in the members best interest and there’s all already remedies under legislation for any issues that arise and we don’t see a large number of issues we don’t see a systemic problem in Superannuation.
Ross Greenwood: It is all like an inquiry into open banking right now and as a result of open banking, it’s going to give more organizations the opportunity to compete with their big banks. Superannuation funds could be first and foremost among those because they have a deep pool of capital available to them. Is it not therefore reasonable to think that if we throw our heads forward even three or four years and if open banking does come into Australian as it has in Europe that our Superannuation funds might be fulfilling many of the functions of banks anyway?
Martin Fahy: I think what Superannuation funds are very cognizant of is they are there for the long term for their members they are thinking in 30 to 40 years time horizons for when people retire. They need to allocate their assets to things that are generating returns to their members. The question of this community standard and expectation, Ross, is a strange one. We have a C-sect that says you act in members’ best interest to deliver them good retirement outcome.
I hate to think about the things that we’ve done in the name of community standards and antidote that’s emerged from the political landscape that we’re applying to a heavily regulated prudentially regulated industry. What you have to understand is that Australian funds are supporting infrastructure ports, they provide 14 cents of every mortgage that’s provided in this country through banks.
They have 13% of their money in cash, they’ve got 21% of the Australian and this is not Superannuation funds, this is super annual. This is members of funds that are providing their money into the Australian economy.
Ross Greenwood: In other words, what you are saying there is no skeletons in the closet, there is no issues going for that you think require the Superannuation industry to be at least investigated or part of a Royal Commission into the financial services sector?
Martin Fahy: We have five pieces of legislation, Ross, currently before the house. We have legislation on increased powers for APRA, we’ve legislation on member outcome, we’ve got legislation on external dispute resolution, we’ve got legislation on governs and we’ve got legislation on civil sector. The PJSE is investigating insurance in Superannuation. We’ve been reviewed to date in the last 15 years.
We’ve got all of this outstanding legislation and yes, we’ve got the third best system in the world. Ross, if our system of Superannuation, if our education system here was ranking worldwide as our Superannuation system does, we’d be thin lenders to Singapore and we’d be having parties in the streets for our education system. If our health care system ranked as well as our Superannuation, we’d be just behind France.
The reality is we’ve got a world-class system, sometimes, Ross, we really do need team up to take a hard look in the mirror and realize when we’ve got a good and we’ve got a great Superannuation system.
Ross Greenwood: Doctor Martin Fahy, he is the chief executive of the Association of Superannuation Funds in Australia and Martin as always I appreciate your time on the program.
Martin Fahy: Thank you, Ross.
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