Draft legislation proposed by Treasury includes material governance changes for superannuation funds. The main changes proposed are:
- all Australian Prudential Regulation Authority regulated superannuation funds will be required to have a minimum of one third independent directors on their trustee board, and an independent chair;
- the definition of ‘independent’ is to include persons who do not have a substantial holding in the trustee or do not have (or have not had within the last three years) a material relationship with the trustee, including through their employer;
- trustees of funds that do not have a majority of independent directors be required to report on an ‘if not, why not basis’; and
- a three year transition period to apply for existing funds.
While the changes should be welcome as they will legislate good governance principles, it is difficult not to conclude that they are politically motivated and targeted at industry super funds. Day to day, advisers and members should not see any material difference from the changes. However, it will be interesting to see if, when implemented, fund governance is a differentiating factor for advisers in their recommendations. While superannuation as an industry, being so heavily prudentially regulated, has not suffered the same scandals as numerous advice businesses (e.g. NAB, Macquarie, CBA, Storm) which have fallen foul of their regulatory obligations, the new rules should result in better risk and conflict management. This, in itself, is a worthwhile outcome.
Treasury has announced that the exposure draft legislation is open for public consultation until 23 July 2015.