The ‘Grand Ambition’ of the Super Industry

At the ASFA Annual Conference, AustrallianSuper’s CEO, Ian Silk, outlined his vision for a thriving superannuation future, one which must include a grand vision.

AustralianSuper CEO, Ian Silk, always gives an impressive on-stage performance. Generally presenting (as in this instance) without notes, he speaks confidently and passionately. His opening keynote address to the record 1,900 conference attendees was on the importance of the superannuation industry having – and enacting – a grand ambition to ensure a thriving future. And he wasn’t reticent to say that he observes a significant gap between how the industry overall operates now and the realisation of that grand ambition.

Why the need for a grand ambition?

“Isn’t it enough for us to do what we are required to do by our Boards, by the regulators, by the Government?” was the rhetorical question posed.

“No, it’s not,” he continued. “Not even close.

“We need a grand ambition because that’s the responsibility that was given to us over 20 years ago. Parliament – and by extension the people of Australia – outsourced the operation of the superannuation system to us.

“Two crucial elements underpin the system. The first is that it is universal – everyone takes part no matter who they are or where they work. The second is that we provide most people with a tax concession, an incentive from the public purse to save for the future.

“This means we have a greater responsibility to act in our members’ best interests. So it’s up to this industry, those of us in this room and our colleagues, to envisage and then deliver the vision. And that vision has to ensure the progress of all people.”

“This is the least that should be expected of us given we manage two trillion dollars’ worth of the hopes and dreams of working Australians.”

Superannuation system under fire

As the collective superannuation nest egg grows (currently more than $2 trillion), it is inevitable that there will be a sharper focus on the fees, investments and business practices within the superannuation system.

Whilst claims were made at the conference that the superannuation system saves the government around $7 billion per year (via a reduction in social security payments), a research paper released by think-tank Grattan Institute calculates that tax breaks on super reduce income tax collections by more than $25 billion a year, with more than half of those benefits flowing to the wealthiest 20 per cent of households.

The report suggests that better targeting of superannuation contributions tax breaks could save the budget $3.9 billion a year, and a 15 per cent tax on the superannuation earnings of retirees could raise another $2.7 billion a year.

Last year, it was superannuation fees that the Grattan Institute took aim at, pointing out that at an average of 1.2 percent of account balances, a typical 30-year old would lose more than $250,000, or about a quarter of his or her total balance, by retirement.

Currently, superannuation governance is in the spotlight, with the government favouring an approach that would see superannuation fund boards required to have at least one-third independent directors and an independent chair.

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Grand ambition of superannuation industry not articulated

“We’ve avoided articulating the grand ambition of this industry, to spell out clearly what a thriving future looks like,” said Ian Silk.

“It doesn’t drive behavior or shape our culture. If it did, then these issues would have been resolved a long time ago. Only a few years ago, the global financial services industry – our industry – caused governments globally to spend trillions of dollars of taxpayer money to fix problems of the financial service industry’s creation.

“We relinquished growth, prosperity and, most importantly, trust.

“Of course, economies reset and growth returns. But things get lost along the way. Between 2008 and 2012, it is estimated that 28 million jobs were lost globally. That’s more people than currently live in Australia. This is the context in which all of us operate. The context in which we all ask for people’s trust. And there is no greater trust than placing your future in someone else’s hands.

“So what should our grand ambition be? What should be our ‘man on the moon’ aspiration?

It’s simple. We must help as many members as possible reach the ASFA comfortable standard level of income at retirement. The ‘man on the moon’ moment for our industry will be achieved when every Australian has adequate income in retirement. And that means everyone. Women, people with broken work patterns, the low paid, casual workers, indigenous Australians. When working Australians trust and believe us we will have landed.

“And, just by going on the journey, we will deliver better environmental, social and governance outcomes.”

What we do isn’t about money, it’s about people.

In his conclusion, Mr Silk called for industry-wide change – because the industry can, and should, be doing better.

“We have the capacity to create public benefit of a type that was unimaginable only a few short decades ago,” he said.

“To create positive social change that will last for generations. I know where I work we will be doing all we can to achieve the mission I have outlined today.”

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