A- A A+

Dodgy doings in industry funds

08 May 2014  |  Super

DodgyIn today's AFR it is alleged that super fund managers have taken advantage of their clients' funds. There is a credit card expenses scandal at a $700 million industry superannuation fund, Health Industry Plan, which has triggered an investigation by the Australian Prudential Regulation Authority and wholesale changes to the fund’s trustees.

It is another instance of what many DIY super investors suspect. That the people charged with looking after their money cannot resist giving themselves a healthy slice of it as well. It is one reason why DIY super has surged so strongly since the Global Financial Crisis. If ever there was a vote of suspicion, it is that.

The Health Industry Plan, which has 24,000 members, is in the last stages of a merger with the $2.3 billion Prime Super, which has 150,000 members and is the default super fund for 33,000 employers in the rural sector.

The AFR draws a few lessons, which are a useful guide for DIY super investors:

"First, problems of corporate governance in industry super funds cannot be ­exclusively sheeted home to the involvement of unions.

In this case the chairman and CEO were employer representatives who were able to approve each other’s expense accounts.

The fact that APRA asked the remaining directors of the fund to examine accounts going back over five years suggests the power of the two men was well entrenched.


Their power was only broken down by the actions of a brave whistleblower.

The second lesson is that directors need to be turned over regularly to ensure fresh blood and that sunlight is brought into dark places.

Long-serving trustee directors are a prominent feature of industry super funds.

Mr Wallace was a director of Health Industry Plan for 20 years and Mr Bernays was chief executive for 14 years.

The equal representation of union and employer representatives made it ­impossible for difficult issues in relation to the fund’s expenses to be dealt with at board level.

The federal government has proposed a corporate governance reform package which would involve at least three ­independent directors being appointed to each industry fund board of trustees."

The somewhat discredited Liberal Party minister (suspended) Arthur Sinodinos released a discussion paper Better regulation and governance, enhanced transparency and improved competition in superannuation.

Good governance is essential in super, and that applies to self managed super as well. The AFR notes that a chairman and CEO should not be able to approve the reimbursement of each other’s expenses. That kind of conflict is inevitable in a DIY fund. Trustees should be aware of that.

But the main lesson from this scandal is that just because a fund is big does not mean it is acting in your interests:

"The latest figures on fund expenses ­published by the Association of Super­annuation Funds shows that in many cases bigger funds do not have lower admin­istration expenses than smaller funds."


Source articles

Similar articles from Super

What happens if trustees lose it?

 | 5/27/2014

Lose itDIY super funds are fiercely independent in spirit. But they are not usually independent in structure. Rarely is there an independent trustee. It is a big problem.

Want to pay for financial advice? Buyer beware.

 | 5/26/2014

BewareSuper investors have to assume responsibility for what happens to their own money. There is good financial advice available, but there is also a lot of self interested advice being proffered. It is very much a case of "buyer beware".

Government leaves super alone

 | 5/13/2014

Australian GovernmentSuperannuation has been left untouched in the Budget. Its tax advantages remain intact. The rise in contributions has been put off, however. The treatment of excess contributions will also change.

Non concessional contributions changes

 | 5/13/2014

2014 upwardsAny investor looking to give their super fund balance a boost by making a non-concessional contribution, needs to be aware of some changes to the limits that will soon come into play.

Part 1. An introduction to Superannuation

 | 5/4/2014

Info ButtonIf you have been thinking about setting up a SMSF there are some background issues you need to consider.



Subscribe to the Personal Super Investor weekly email to keep abreast of developments in SMSF law and investment markets. SMSF investors looking to improve investment returns from shares, property, cash or other specialised investments, will find the PSI weekly newsletter an invaluable resource.

Subscribe now »



The contents of this website are of a general nature only and have not been prepared to take into account any particular investor's objectives, financial situation or particular needs. Our content is not intended to be advice and must not be relied upon as such. You should seek independent advice tailored to your specific circumstances prior to making any decisions. Personal Super Investor does not provide financial product advice or recommend any financial products: Where this website or it derived newsletter/electronic publication refers to a particular financial product, whether it be within our editorial or a 3rd party advertising, advertising promotion or advertorial, then you should obtain a Product Disclosure Statement (PDS) relating to that product and consider the PDS before making any decision about whether to acquire the product. We also recommend that you should seek professional advice from a financial adviser before making any decision to purchase any financial product referred to on this website. We do not make any representation or warranty that any material on the Personal Super Investor website will be reliable, accurate or complete, nor do we accept any responsibility arising in any way from errors or omissions of our content or any content provided by any advertiser appearing the Personal Super Investor website. We will not be liable for loss resulting from any action or decision by you in reliance on the Material (whether editorial or advertising) on the Personal Super Investor website, nor any interruption, delay in operation or transmission, virus, communications failure, Internet access difficulties, or malfunction in your equipment or software. By using the site you acknowledge that we are not responsible for, and accept no liability in relation to any content contained on the site that you may use, including any other users’ use of the Personal Super Investor website in any circumstance. You use the Personal Super Investor website at your sole risk.