Industry superannuation fund

An industry superannuation fund (or, simply, 'industry fund') is an Australian superannuation hello fund originally established to provide for the retirement of workers from a specific industry. While industry funds are no longer tied to specific industries, they remain not-for-profit, mutual funds which are membership-based and do not have shareholders. Industry super funds can be contrasted with retail super funds (or 'wholesale master trusts'), which are public offer funds managed by financial institutions. Profits from retail funds are distributed to shareholders or investors (the trustees of the fund), whereas industry funds return profits directly to members.

Industry Super Australia (ISA) is the peak body of the industry fund sector.[1]

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.[2][3] In practice, over 75% of workers remained with their employer’s default fund, which was usually an industry 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, all employers must select an approved MySuper account as their default super fund into which they must pay all default super guarantee contributions (minimum employer contributions).[4] However, employees can nominate an alternative investment fund, called a stapled super fund.[4]

The Fair Work Commission determines which superannuation funds are suitable to be industry super funds and adopted by employers as default funds.[5]

History of industry super funds

Prior to 1992, superannuation was common among workers; 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 across the economy, and superannuation policies were tied to individual awards, which differed between industries.

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.[6] The change came about through a tripartite agreement between the government, employer groups and trade unions. Trade unions agreed to forgo a national 3% pay increase for their members, which would instead 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. This reform resulted in 72% of Australian workers being covered by retirement savings schemes.[6]

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 contrast to pre-existing 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 February 2022, ISA members are:[7]

Other industry super funds (that are not members of ISA) include Aware Super, REST Industry Super, and UniSuper. ME Bank was owned by 26 industry super funds,[8] until it was sold to Bank of Queensland in 2021.

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.[9] It is a peak body for the industry superannuation sector. ISA comprises 15 industry super funds as members, each of which is not-for-profit, including AustralianSuper, Hostplus and Cbus.[10] ISA-member funds collectively hold about 5 million accounts.[11]

As of September 2020, the Board of ISA is chaired by Greg Combet and includes representatives from industry super funds, former state and federal ministers, and the ACTU Secretary, Sally McManus.[12][13]

Advertising campaigns

ISA manages collective projects on behalf of its member 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, including the long-running “Compare the Pair” television and press campaign,[14] which has run multiple iterations over many years, has achieved household recognition throughout Australia. The campaign is currently in its 3rd generation.[15]

The "From little things" campaign used Paul Kelly and Kev Carmody's song "From Little Things, Big Things Grow"[16] from September 2009[17][18] until the end of 2014. After that, the Ben Lee song "We're All in This Together" would be used.[19]

Consolidation of accounts

In September 2018, ISA 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 is estimated that it may collectively save 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.[20]

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.[20]

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[21]
  • The Cooper Review (2010) into the superannuation system and regulatory improvements[22]
  • The Senate Standing Committee on Community Affairs covering the proposed tightening of pension eligibility[23]
  • The Trowbridge Review into potential conflicted remuneration and its effect on life insurance advice[24]
  • 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.[25]

Retail super funds

The four major banks in Australia and other financial institutions own the majority of for-profit retail super funds. These owners of the retail funds have been lobbying federal 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. In 2012, the Abbott government committed to opening up the default fund section system suggesting that doing so will generate greater competition.[26]

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

Testimony at the Hayne Royal Commission highlighted the various actual and potential conflicts of interest that exist retail super funds are owned by banks: for example, when bank advisors are required to recommend the financial products of their bank to a member of the retail super fund, this may not be in the best interest of that member.[28] Consequently, several banks have since commenced processes to dispose of their wealth management divisions.[28]

See also

References
  1. "About".
  2. Choice of Superannuation Fund - Meeting your obligations. Canberra, Australia: Australian Taxation Office. 2015. p. 3.
  3. corporateName=Commonwealth Parliament; address=Parliament House, Canberra. "Chronology of superannuation and retirement income in Australia". www.aph.gov.au. Retrieved 22 April 2022.{{cite web}}: CS1 maint: multiple names: authors list (link)
  4. Office, Australian Taxation. "Select your default super fund". www.ato.gov.au. Retrieved 22 April 2022.
  5. "Determining a new employee's superannuation fund - Fair Work Ombudsman". www.fairwork.gov.au. Retrieved 22 April 2022.
  6. corporateName=Commonwealth Parliament; address=Parliament House, Canberra. "Chronology of superannuation and retirement income in Australia". www.aph.gov.au. Retrieved 24 April 2022.{{cite web}}: CS1 maint: multiple names: authors list (link)
  7. "Find the Best Super Fund for You » Industry Super". Industry Super. 11 February 2022. Retrieved 11 February 2022.
  8. MEBank. "About Us". ME Bank. Retrieved 6 September 2020.
  9. Industry Super Australia (16 February 2018). "Treasury Laws Amendment (Taxation and Superannuation Guarantee Integrity Measures) Bill 2018: ISA Submission" (PDF). Retrieved 6 September 2020. {{cite journal}}: Cite journal requires |journal= (help)
  10. Cockburn, Gerard (24 July 2020). "Super funds calling for transparency from government". NewsComAu. Retrieved 6 September 2020.
  11. "History". Industry SuperFunds. Retrieved 6 September 2020.
  12. "Our board". Industry Super. 16 April 2020. Retrieved 6 September 2020.
  13. "Commercial SMSF Loans".
  14. "Industry Super set to launch new 'Compare the Pair' campaign". Industry Super Australia. Retrieved 6 September 2020.
  15. "Industry Super Unveils New 'Compare The Pair' Campaign". B&T. 14 August 2017. Retrieved 28 August 2019.
  16. "What happens when real people meet the finance system". Industry Super Australia. Retrieved 6 September 2020.
  17. "From little things, big things grow". Campaign Brief. 3 September 2009. Retrieved 6 September 2020.
  18. Taylor, Mike (30 August 2009). "Industry funds launch new ad campaign". Money Management. Retrieved 6 September 2020.
  19. Jones, Steve (23 October 2014). "Industry Superfunds kills off 'From Little Things' ad campaign soundtrack after five years". Mumbrella. Retrieved 6 September 2020.
  20. Fernyhough, James (10 September 2018). "Industry funds strike deal to solve multiple accounts problem". The New Daily. Retrieved 6 September 2020.
  21. "Financial System Inquiry". fsi.gov.au. Retrieved 21 August 2015.
  22. "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
  23. "Senate Standing Committees on Community Affairs – Parliament of Australia". www.aph.gov.au. Retrieved 21 August 2015. Obfuscated by Age
  24. "Trowbridge Report" (PDF). Financial Services Council. Dead Link
  25. "Senate Economics Legislation Committee – Parliament of Australia". www.aph.gov.au. Retrieved 21 August 2015. Obfuscated by Age
  26. "Abbott must prepare for super fund fight". ABC News. 29 March 2012. Retrieved 24 April 2022.
  27. 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.
  28. The Age, 22 September 2018, Everything you need to know about the royal commission so far
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