Why Super’s governance model delivers for members

Over 11 million Australians now have their retirement savings in a profit-to-member super fund.

The shared governance model of this type of fund – whether they arose from an industry, company or the public sector – was created with a clear and single purpose. To serve the fund members whose retirement savings they safeguard and grow.

They do so by deeply understanding their members and the workplaces in which their members work – they know exactly whose money it is they are stewarding.

Outside of the world of super, you’d think of them as not-for-profit or for-purpose organisations. But in super, their purpose is to generate profits solely to return them to their fund members.

That member-service ethos is reflected in the equal representation model.

That’s where both employer bodies and employee representatives nominate candidates to the boards of the fund in equal numbers to serve as trustee directors. Some funds also have additional independent directors and independent chairs. Each fund decides the best director mix to advance the interests of its members.

And the law requires all trustees to operate to the highest standards of governance and performance.

Representative trustee governance is not some quaint artefact of history – it’s the predominant model used by high-performing workplace pension schemes globally. It’s used because it works.

When you look at the track record on returns for super fund members in balanced super products, the top ten super funds over the past decade have employer and employee nominated board members.

Calls for this model to be overhauled – renewed by a handful of people last week – are not new.

Yet, for over 30 years, the model has delivered superior returns for millions of fund members. And these types of funds have largely avoided the sorts of consumer harms the Banking Royal Commission uncovered at financial services companies with for-profit governance models.

The commission examined the equal representative model closely – and did not raise concerns. Commissioner Hayne didn’t recommend mandating board structures – instead finding that, in increasingly complex environments, super fund boards must collectively possess relevant skills and experience to oversee the fund and grow members’ savings.

The inherent strength of this model is that it brings together board members with different perspectives, experience and skills. It guards against group think.

Super fund members have been well-served by having a mix of directors. Some bring experience in employer bodies like the Australian Hotels Association, AI Group, the Master Builders and State Chambers of Commerce – who deeply know the employer landscape. And some bring experience in union roles that gives them a strong understanding of the needs of workers.

It’s not only on performance that profit-to-member funds have led the way. They’ve also been at the forefront of work to enhance the super system to benefit super fund members. From proposing policies to close the gender super gap – like pushing for working mums to be paid super on parental leave – and advocating for reforms to help Australians get $5 billion in unpaid super.  

Profit-to-member super funds have backed performance tests that help to keep returns high and fees low for members. They’re pushing to make the super system simpler and easier for retirees to navigate – and to get Australians better access to low-cost financial advice to plan for retirement.

And profit-to-member funds have safeguarded the super system’s policy foundations – to ensure a financially secure retirement to millions of Australians.

A strong and diligent regulator – the Australian Prudential Regulation Authority (APRA) – oversees Australia’s super system. Funds are required to adhere to stringent standards in their governance and operations. That’s what super fund members expect.

That’s why it’s appropriate that APRA has instigated an independent review into issues raised in recent weeks – and Cbus has supported the regulator’s actions.

It’s a legal requirement that trustee directors must pass a fit and proper assessment before their appointment and each year. These are comprehensive assessments – and APRA’s expectations are clear.

These requirements are even more robust than the assessments made of directors at ASX-listed companies. And if super funds had the governance model of listed companies, there’s no evidence it would mean stronger governance or performance.

What matters most is a director’s commitment to protect and promote the interests of fund members, the experience, expertise and perspectives they bring to the board table, and their skills and diligence.

A clear member-service ethos and the equal representation model have delivered strong returns for the members of profit-to-member super funds over decades. The bottom line is this: that model has meant members in those super funds have had more money to retire on. Misha Schubert is the CEO of the Super Members Council – a non-partisan voice advocating for 11 million Australians with their retirement savings in profit-to-member super funds.