Super Heroes

Artwork courtesy Fairfax Photo library

How the workers took on the hot shots… and won

SUPER HEROES: This was how the front page of The Australian Financial Review described industry funds after super choice became law last year. The following news report made it quite clear - workers' superannuation funds are leading the pack. When it comes to super choice, workers are better off sticking with what they've got.

Nor did the article mince words when it came to why the Howard Government has been plotting for nine years to 'let people choose their own superannuation fund'.

Howard's plan "is perfectly compatible with a liberal philosophy - but also has a distinctly appealing secondary gain," reporter Alison Kahler wrote. "It might just stymie the union movement's growing control of Australian capital."

Workers' collective retirement funds have clout. Industry funds, born out of the union movement and decades of worker struggle, now hold $104 billion of the nation's retirement savings.

Maritime workers were among the first workers to win super (see overleaf) and waterside workers were at the frontline of the ACTU campaign for government-funded universal workers' superannuation, with national strike action in support of the ACTU super push in 1986.

Within weeks the Australian Industrial Relations Commission accepted the ACTU claim that all workers covered by an award should have industry super.

At the time the ACTU estimated that only 40 per cent of the workforce (and 24 per cent of women workers) enjoyed employer sponsorship on retirement. What's more, some companies treated super funds as a company asset and loans to companies were not uncommon. Nor were scams where companies clawed back any super surplus. (see box)

By 1987 former ACTU secretary, PM Bob Hawke, made superannuation contributions compulsory. And in 1992 the Federal Labor Government introduced the superannuation guarantee increasing super contributions from 3 per cent of wages to 9 per cent over the next decade.

Former Reserve Bank governor Bernie Fraser and ACTU Secretary Bill Kelty set up Super Members Home Loans in 1994 providing cheap mortgages for workers based on the pooled industry super funds. In 2001, Members' Equity became the 'workers' bank'.

Since coming to power the Howard Government has abolished the government's super contribution. It is now attempting to undermine the union-founded industry super funds, with new laws and a multi-million dollar campaign coaxing workers to 'choose' their own superannuation.

So how is it that, despite the odds, most workers have stayed put and union superannuation funds have become the investment stars?

Industry funds work for members rather than shareholders, they charge low fees and do not pay a commission to financial planners, returning all profits to members.

But according to The Financial Review there is another reason. Industry fund directors (half of whom are union officials) have made better commercial decisions than their rivals in big business.

Michael Rice from independent actuary Rice Walker: "When the stock market has been down, they have tended not to have very big downturns. They have also been prepared to take punts - like reducing exposure to international shares... I think, given the record, you'd have to say that it is good management rather than luck."

The Financial Review cites investment in infrastructure as just one of the industry funds "sound investment decisions."

Industry funds are not encumbered by incestuous corporate decisions. The big advantage of the workers' funds is that they are free of business world restrictions that dictate who will actually invest money on behalf of the funds. Commercial funds are often required to put money into fund managers owned by the same company - to share profits with related companies. This practice can have an obvious downside.

Nine of the top 10 superannuation funds in the five years to June 30 were industry funds according to independent analyst SuperRatings - a figure confirmed by Rainmaker. And the MUA funds have been among the top performers.

The industry super funds advertised their success widely in the media to counteract the government campaign last year. They commissioned independent research to back up their claims.

Research conducted by SuperRatings, commissioned by Industry Fund Services, found that over the five years to March 2005, average industry funds returned $9.60 to their members for every dollar in fees, while the average master trust (like those run by the big banks and insurance companies) returned only $3.

For someone on a starting salary of $50,000, this could mean a difference of over $158,842 over a 40-year working life, measured in today's dollars.

Today there are more than 5 million members in "all profits to members" funds with $70 billion of workers' super.

That's why the Howard Government wants workers to leave the industry funds and join commercial funds. It says it's about choice. Like giving workers the right to choose whether to join a union or not, whether to bargain collectively or sign an individual contract, whether to take your annual leave or cash it in.

Like public holidays and sick pay, superannuation will not even be protected under awards or by legislation in future. Like lunch breaks and leave, it's up for grabs too.

Superannuation is something workers have come to take for granted. But the fight to win it was long and hard and should not be forgotten.