[NEW REPORT] Guarding your nest egg: Restoring independence to industry retirement funds

[NEW REPORT] Guarding your nest egg: Restoring independence to industry retirement funds

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Guarding your nest egg: Restoring independence to industry retirement funds

A report by the Menzies Research Centre 

Introduction:
Whether there ought to be a minimum number of outside or independent directors appointed to superannuation funds is the subject matter of this report. The answer to the proposition is that there are compelling reasons for the Commonwealth to mandate independent directors in the conduct of all superannuation funds in Australia that take contributions from members of the public. This report sets out the three primary reasons for the adoption of the independent director proposal currently posed by the Commonwealth; the views of previous inquiries around independence and disclosure and, finally, concludes with the key points supporting the recommendation for independent directors.

The legislation recommends that the conflicts of interest within the compulsory superannuation system require further oversight and management. Superannuation fund consumers, as de facto investors, have good reason to be concerned about the conflicts of interest that exist in non-private superannuation funds. This conflict exists in all funds regardless of type, whether profit or non-profit. No superannuation fund can counter this concern by citing market place behaviour or performance statistics. The conflict concern goes to the Commonwealth’s view of strategic governance of its residual risk and accordingly extends to the governance of all superannuation funds with collective membership howsoever structured.

Superannuation fund members are best provided for by sufficiently qualified persons who independently ensure a check and balance between the owners of the superannuation fund and the fund itself. It is almost 10 years since a government review recommended independent directors be required on superannuation funds. It is apparent that enactment of this overdue recommendation will increase the confidence of the community in the governance of superannuation funds overall.

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