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Financial services minister Jane Hume has issued a caution to super funds seeking permission from courts to build a special pool of capital to help service future regulatory penalties or fines, hinting at possible Parliament action.
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Hume warns super funds tapping into members’ money to ‘save their own skins’
24 November 2021
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10 minute read
Earlier this month, Cbus confirmed it had approached the Supreme Court to seek permission to amend its trust deed to build a special pool of capital to help it service future regulatory penalties or fines.
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The fund, much like QSuper before it, had requested a new fee-charging power to help it grapple with incoming changes that prevent funds from using members’ money to pay fines. The changes are expected to dearly impact the solvency of industry funds, which have low shareholder capital.
But, speaking at the AFR Super and Wealth Summit on Monday (22 November), the superannuation minister said she was watching industry funds closely.
“Recently, a number of super funds applied to the courts seeking permission to charge members a new fee to build a trustee financial contingency reserve,” Ms Hume said.
“Let’s not kid ourselves as to what this really is; taking member’s money out of their retirement savings to set up a pool of funds – owned by the trustee – to ensure they can pay for penalties due to their own misconduct.
“As you’ve just heard me say, so many of the government reforms are about lowering fees and protecting retirement savings. So the application of a whole new category of fee charged to members, I feel, is a retrograde step.”
Ms Hume hinted new laws could be enacted to prevent funds from using members’ money to save “their own skins”.
“If it appears that trustees are confusing their own interests – saving their own skins – with the best financial interests of members whose money is unlikely to be imperilled by a change of trustee, I would expect regulators to take action. And the Parliament might too,” the minister said.
“And if trustees think otherwise, perhaps it’s a question that should be put to members at their Annual Members Meeting? I’m not sure how many members would vote to give away some of their hard-earned retirement savings to bail out a trustee for wrongdoing. Particularly when trustees and those organisations that stand behind them have their own resources which they could alternatively draw on rather than milking their members,” Ms Hume added.
Earlier this month, a spokesperson for Cbus told Accountants Daily's sister brand, InvestorDaily, that the fund would approach this matter carefully, vowing to “gradually” build a level of capital that supports its financial resilience.
Cbus, the spokesperson said, “will build this capital through a fee charged against Cbus reserves, which cannot be more than 0.10 per cent of Cbus net assets over a biennial period but which is expected to be significantly less than this.
“The legislation disproportionately impacts industry funds which may need to fund a separate reserve of trustee capital to meet any potential fines or penalties issued by regulators.”
Last month, the Supreme Court of Queensland declared QSuper could impose a new fee on members in order to pay any regulatory penalties or fines.
At the time, QSuper confirmed the court declared the trustee is “justified” in amending the trust deed to raise a fee as a prudent response to recent legislative changes.
“This will support the ongoing financial resilience of the trustee and its ongoing ability to perform its duty to manage the fund in members’ best financial interests,” QSuper said.
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