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Similarly, the Government’s decision to introduce a
low-income super rebate was in line with AIST’s recommendation
to improve the equity of the super system.
RISING TO THE COOPER CHALLENGE
At the same time as we were lobbying on the 12 per cent,
AIST was also busy on the Cooper front. Hardly a day went
by without some aspect of the Super System Review being
debated in AIST offices, at member briefing sessions, and
with Treasury and other government officials.
At the start of the year, AIST’s chief concern was the
Review’s recommendation to ban cross subsidisation
through its so-called ‘Choice Architecture’ model. In our
very detailed submission - as well as in opinion pieces and
media interviews - AIST strongly argued that the model
was flawed. We also used our submission to call for a
solution to Australia’s $16 billion lost super problem; the
removal of hidden fees and commissions on compulsory
super contributions; and a switch in focus from short-term
to long-term returns. We strongly argued against moves
to legislate for fund size and instead called for the removal
of barriers to gaining economies-of-scale through collective
investing.
When the final MySuper proposal was released in May,
we were relieved to see the Cooper panel had abandoned
its original ‘Choice Architecture’ model.
But the debate on Cooper’s many other recommendations
had only just begun. While a raft of measures to
improve system efficiency - such as the adoption of
the tax file number as a key identifier - were broadly
welcomed, the industry was divided on many other
key elements of the Cooper package. Many of our
member funds were confused as to where MySuper
was heading and that MySuper would simply end up
being a more costly version of what they were already
providing. In numerous meetings and policy briefings
with our members, the Government and other industry
stakeholders, AIST worked hard to ensure that these
and other concerns of the not-for-profit sector were
clearly articulated.
WORTH FIGHTING FOR
Of particular concern to AIST was Cooper’s recommendation
to effectively water-down the equal representation
system of governance. While most other industry
associations were conspicuously silent on this issue,
AIST was persistent and consistent in arguing that our
unique system of governance had the runs on the board.
We gathered independent evidence about the pivotal role
played by the representative trustee system in delivering
superior returns to members and we presented this
evidence to journalists and other industry commentators.
Behind the scenes we held many meetings with the
Government – first with the then Minister for Superannuation,
Chris Bowen, and from August onwards, with
the Assistant Treasurer and newly-elected Minister for
Superannuation Bill Shorten.
“It’s the not-for-profit sector that
has driven the reform agenda of the
past 25 years and driven it in the
right direction”
Both Ministers turned out to be good listeners. By
December, when the Government had released its formal
response to the MySuper recommendations, the equal
representation system had emerged intact. Importantly,
it will continue to play a key role in delivering low-cost,
commission-free, default super to Australian workers
through the MySuper model. The Government also
rejected the notion of ‘non-associated’ directors and
confirmed once and for all that there would be no ban
on cross-subsidisation within MySuper funds. Common
sense also reigned on the issue of fund size. There
will be no forced mergers and it will be left up to funds
and trustees to determine what is in the best interest
of fund members.
FEE RESEARCH WELL RECEIVED
AIST was also successful this year in helping drive debate
on fund manager fees. After completing a research project
with Rice Warner on the issue, AIST called for a re-think
on fund manager fee structures. Our study clearly showed
the existing industry-wide practice of rewarding fund
managers for the size of assets under management had
failed to deliver value to super fund members.
The study’s spotlight on fund manager fees was timely,
particularly as the Cooper Review – whilst recognising that
investment fees were the biggest cost in the super system
– stopped short of recommending any major changes to
the way these fees were structured. The study has been
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