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Super funds must influence public debate in the interests of members

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Super funds must influence public debate in the interests of members

With nearly $3 trillion in funds under management, Australian superannuation funds are a significant and growing part of the Australian economy.[1] As the industry has grown, superannuation policy and regulations have changed materially, and will continue to do so with the planned Your Super, Your Future reforms and the recently released Retirement Income Review.

Given ongoing change in policy and regulation is inevitable, funds are often drawn into public debate to influence policy in members’ best interests.

Many decisions that funds make, and the justifications for those decisions, are part of public debate. For example, many super funds have announced plans for their investment portfolio to be carbon-neutral (i.e. net zero emissions) and AustralianSuper has made “Collaboration and advocacy” one of the four pillars of its net zero transition.[2] Meanwhile, Aware Super has expressed a clear view on the need for investment in key worker affordable housing, noting a “chronic shortage of affordable rental housing”.[3]

This role influencing public debate has become increasingly contested. Jane Hume, Assistant Minister for Superannuation (and former Senior Policy Advisor at AustralianSuper), recently said: “The mission of a super fund is not to change the earth's temperature, the purpose of superannuation is to build savings for retirement or to create an income for retirement.”[4] Consistent with this, in the 2020/21 budget the government announced it would legally compel superannuation trustees to act in the best financial interests of their members, and demonstrate how their actions are consistent with this.[5]

Even if the legislative requirements of trustees are changed, the legitimate role for super funds in public debate to support the financial interests of their members remains. The recent case Rest Super settled with a member regarding management of the risks to retirement savings from climate change is a clear example where members’ financial interests intersect matters of public debate,[6] noting APRA has also announced its plan to provide regulatory guidance on climate-related financial risks.[7]

From Nous’ experience, the sweet spot for funds is in the overlap of three forces:

  • Members’ future needs: Super is a long-term investment, so funds must take the perspective of the long-term interests of members.
  • Fund capabilities: A cornerstone of a fund’s role must be the expertise it brings based on the characteristics of its members.
  • Matters of public debate: Funds must be able to demonstrate a clear link between the issues they pursue and their members’ best interests.

To understand a fund’s role in public debate, it is valuable to explore these three forces in depth.

Members’ future needs

Given superannuation is a long-term investment and many members are passive or disengaged, there is a temporal dimension to funds’ duty to act in the best interest of their members. Per their legislative requirements, funds must think carefully about the needs of members’ future selves and seek to influence matters that will have a long-term impact on members.

The importance of funds representing members’ future selves was evident in a member discussion that Nous recently facilitated for a large super fund. During the discussion, many retired superannuation fund members noted how little they cared about super when they started work, and now several decades later, how glad they are their fund had been there since long before they were interested.

Funds should ask themselves how well they know their members’ retirement needs, how their member base will change over time and what policy changes will deliver better outcomes for members in retirement. For some funds, the needs of people who spend less time in the workforce and accumulate smaller super balances (many of whom are women) require special attention.

If they do this, funds are well placed to position themselves as the voice of members’ future selves. They can create a platform of legitimacy by demonstrating that their actions are motivated by the long-term interests of members.

Fund capabilities

The tools and insights available to a fund to influence public debate will depend on the unique characteristics of the fund and its members.

A distinctive role (one more valuable for members) may emerge for a fund from the unique features of its member base. A depth of members in an industry will provide a fund with insights to share on matters relevant to that industry. For example, funds with many members in retail and service industries will have insights on the casualisation of the workforce and the implications for members.

State Super, with a much older member base than most funds, offers another example. Its report “Beyond Paid Work”, which grew from a survey of 3,000 members, provided a trove of insights to inform policy around retirement, and, as CEO John Livanas said, “to ensure State Super is appropriately tailoring our support of members and their family”.[8]

Crucial capabilities can also come from other elements of a fund’s operations. Aware Super, for example, has invested heavily in understanding the impact of environmental, social and governance (ESG) matters on the financial performance of companies. Its investment strategy was recognised by the United Nations Global Investors for Sustainable Development Alliance for the way it incorporates ESG considerations into the investment decision process to deliver competitive returns for members.[9]

As CEO Deanne Stewart explained: “We consider all of our potential investments through an ESG lens as we believe this will not only … deliver the best long-term returns to our members but will have a positive impact on our community.”[10] This positions Aware Super to support its members by furthering public debate in their interests.

Matters of public debate

Taking a position in public debate has never been for the faint-hearted. Public discussion of policy matters has always been challenging, complex and contentious. This is exacerbated by the 24-hour news cycle and social media. In this environment, super funds should consider three factors:

  • Get the timing right. There will always be certain times when a contribution will be most valuable. Some issues will only be topical for a short time, so it is crucial to strike at that time. Pick the wrong moment and the contribution will disappear into the abyss.
  • Focus on where you can influence, not just on what is topical. In choosing issues, funds need to consider what is topical and relevant to members. These are necessary, but not sufficient, conditions to choose where to play. Funds must reflect on where their involvement will be influential. For example, many funds to date have decided not to take a public stand on the future rate of the Superannuation Guarantee Levy, believing that any comments (however well-meaning or evidence-based) would not be influential.
  • Be selective rather than general. Matters of public debate are multifaceted. It is valuable to determine the dimension where a fund seeks to exert influence. Super funds will rarely have the luxury of time or resources that think tanks, research institutes and universities do to present comprehensive policy proposals, nor is this likely to be in the best interests of members. A targeted approach will likely be most valuable.

Strategic policy influence

At the intersection of these three forces lies the strategic policy influence that super funds can exercise. Funds need to carefully choose the public policy issues they wish to influence: areas where the fund has expertise, credibility and insight, and where action will benefit members.

Success can be judged by the extent to which a fund can influence matters that concern it. While this can be difficult to measure, proxies exist. Media mentions is one crude measure, while another option is a survey tool such as the Edelman Trust Barometer, which measures trust in institutions.[11] A third option is to poll members, evaluating trust, awareness and support for campaigns.

It is vital to bring members with you. Explain what you are doing and why you are doing it to support their best interests, so they can be allies in your efforts and understand how the fund’s efforts benefit them.

With good planning, expert advice and an openness to different approaches, super funds can effectively leverage their influence to best support their members.

 

Get in touch to discuss how Nous can support your super fund to influence public debate.

Connect with Simon Guttmann and Ed Hughes on LinkedIn.

Prepared with input from Tanya Smith, Stephen Teulan, Jared Norris and Ivan Mukarev.

Published on 30 November 2020.

 

[1] ASFA, ”Superannuation Statistics”

[2] AustralianSuper, “Action on climate change: Committing to net zero carbon emissions by 2050

[3] Aware Super, ”Key worker affordable housing”

[4] FT, “Australia’s pensions minister clashes with fund managers and green lobby”

[5] Treasury, “Your Future, Your Super factsheet”

[6] Rest Super, “Rest reaches settlement with Mark McVeigh”

[7] APRA, “APRA outlines plans for climate risk prudential guidance and vulnerability assessment”

[8] State Super, “Beyond Paid Work”

[9] Aware Super, “First State Super answers UN’s call”

[10] Ibid.

[11] Edelman Trust Barometer