AWU warns of superannuation shysters, fee gougers and dodgy investment promoters

15 March 2010

The Federal Labor Government should find new ways to help Australians save for a decent retirement by committing to the long held union view that we need 15% compulsory superannuation.

The union movement is committed to delivering on the long-held policy of 15% super, so as to ensure that members had more than adequate savings after they finished their working lives, Paul Howes, AWU National Secretary said.

Maintain the integrity of our retirement savings

However Mr Howes warned that we need to keep the shysters, fee gougers and dodgy investment promoters away from individual's retirement savings if we are to maintain the integrity of the superannuation funds.

Paul Howes made the comments during his keynote opening address to the more than 1000 participants attending the 20th anniversary Conference of Major Superannuation Funds in Brisbane today.

Profits-for-members Super Funds

Industry Superannuation - run by trustees representing unions and employers - should stop referring to themselves as the 'not-for-profit' sector.

Instead, Paul Howes said,  Industry Super should use the more accurate title of  'profit-for-members' super funds.

 " We should keep explaining over and over that we are actually NOT - not-for-profit; what we are is ‘no profits for us' but ‘profit-for-members''

Medicare and Compulsory Super are Labor's  two greatest post-war initiatives

Compulsory superannuation, alongside Medicare, ranks as one of the great post-war social policy initiatives which the labour movement delivered for Australia, he told the audience.

" I am extremely proud that the idea of compulsory superannuation came from the labour movement - and in particular that it was initiated by the industrial wing of our great movement, thanks to the forward thinking of people like Bill Kelty," Paul Howes said.

"We now need to ensure that this magnificent, extraordinary, profit-for-members financial institution we've seen created in Australia over the last few decades thrives and grows for its members."

The AWU leader said the big goal before the Federal election should be delivering 15% super. He said there were a number of different ways that the Federal Government could deliver this important social policy breakthrough.

How we can finally deliver 15% super savings

" I have been on the record as favouring it coming through tax cuts - and I haven't moved away from that position. But I do accept that in the wake of the GFC, with a massive fiscal deficit to undo - it is very unlikely at the present time," Paul Howes said.

There may be other ways to implement this policy:

• New, extra, Government contributions;
• More employer contributions;
• Regulatory reforms to abolish commissions on super, which act to retard the savings of too many Australian workers;
• Incentives for individuals to increase their own contributions;
• Or substantial cuts in corporate tax if in part we can ensure some of the corporate savings are redirected to superannuation

Reject compulsory taxing of workers' disposable incomes

" However the AWU - and I believe all other unions - reject compulsory taxing of employees' disposable income as a funding source," Paul Howes said.

" We've got to work with the Federal Government to act now to protect the credibility of our unique and successful superannuation system - the only way to do that is to protect Australian's individual retirement nest eggs and our pool of national savings."

Fees and commissions by financial advisors attack and undermine retirement savings

He told the conference that shysters, fee gougers and promoters of dodgy investment products need to be kept well away from union members retirement savings.

" I want to add my weight to the industry fund movements call for regulatory reform to abolish the commission system of remuneration for financial advisors - as is currently happening in the United States and the UK.

" I support the Industry Super Network's research which clearly shows that the fees and commission paid by retail fund members could cost someone on average wages more than a year's salary over their working life.

The more you pay for Super, the less you get

" The fact is the more you pay for super, the less you get. That research, showed that on average for each additional 1 per cent paid in fees, members of the largest public offer super funds lost almost 1.5 per cent in net returns.

" Unfortunately everyone here knows that the overwhelming majority of Australians are completely disconnected on these issues - they take little or no interest in their own retirement savings.

Roll up super savings into the one account  - the one with the lowest fees

" I'm quite attracted to an idea of looking at the multiple super fund accounts that people now have and make it very, very easy (or compulsory) to roll them all up into one - the one they've been using for the last 12 months; the biggest one they have, or the one with the lowest fees.

" I'd go for the third one - because it would go a long way to wiping out excess fees and placing more pressures on all funds - commercial or industry - to always ensure that their own and their providers fees are the lowest possible."

Click here to read the complete speech to the 20th anniversary Conference of Major Superannuation Funds

What the media said

• Support grows for raising compulsory superannuation to 12pc (The Australian)
  

• Kevin Rudd in no hurry to lift superannuation guarantee ( The Australian)

• Industry super fund boards should not be used as 'retirement homes': AWU's Paul Howes ( Super Review)
  

• AWU calls for 15pc compulsory Super ( West Australian/AAP)

• On the shoulders of giants ( Financial Standard)

• Super system changes could save $1b (AAP)