Banks’ policing regime won’t prevent gouging of super nest eggs

The Australian 1:08pm August 7, 2018

Anthony Klan

The Federal Government’s announcement of a new policing regime for the major banks and financial institutions will, like so many similar Band-Aid moves before it, do little to zero to correct and prevent the ongoing, systemic gouging of the public’s superannuation nest eggs.

The Australian Securities and Investments Commission is to be given an extra $70 million to boost its “policing” activities, including $8m to embed “dedicated staff” within the Big Four banks and AMP: which is precisely the type of window dressing critics were expecting.

This is the same regulator which has recently denied it is even responsible for policing the widespread malfeasance in the super sector — which is literally costing the public billions of dollars a year — despite it having, according to its own latest annual report, a team of 53 people dedicated to super policing.

ASIC’s annual report for the year to June 30 2017 states that its “investment managers and superannuation division”, which is responsible for “135 superannuation trustees” has 53 ASIC staff and is led by Gerard Fitzpatrick.

ASIC spokesman Gervase Greene has told us Mr Fitzpatrick no longer runs that division however, running against all the regulator’s claims of transparency and its stated plans for improved performance under its new chairman, James Shipton, ASIC won’t even disclose who the new head of its super division is or when Mr Fitzpatrick was replaced in the role.

The problems with the retail super sector, as have been painstakingly dissected and detailed by The Australian in recent months, go well beyond giving the regulator some extra cash, much of which will be paid for by the banks, who in turn are already charging super members “regulation levies” to explicitly fund regulation charges.

For the past 25 years there has been a hole at the heart of the super regulation which has meant the laws under the Superannuation Industry (Supervision) Act, such as trustees act in the best interests of members, are not actually attached to the penalties — including “punitive damages” and up to five years imprisonment.

This carve-out, allowing super funds to largely gouge as they please without any fear of facing retribution, has been allowed to continue for a quarter of a century, by both sides of politics, despite countless financial system inquiries, senate inquiries, commissions, investigations and even an “overhaul” of the super sector in 2013 under the Future of Financial Advice (FOFA) reforms.

All the way through, ASIC and the Australian Prudential and Regulatory Authority have not only not blown the whistle on this legislative carve-out going to the integrity of the nation’s $2.6 trillion super sector — but, after the Royal Commission was announced, they have in recent months each claimed they are not actually responsible for policing wrongdoing and gouging in the sector.

Such claims and failures over two decades or more, along with serious concerns the regulators have been “captured” by the very entities they are supposed to police, has shown them simply unfit to police the almost $600 billion of super held in retail funds by millions of the nation’s workers.

Regardless of what type of super fund you’re in, we all end up paying for the gouging as literally millions of retirees, instead of self-funding in their golden years under the nation’s great super experiment, are instead forced on to the taxpayer- funded aged pension.