In this months ACTU Super Newsletter: Union Super Power conference Syd/Melb September 2004; Union members — super; Industry funds; Financial planning — choice of fund; Super Guarantee; Superannuation; Financial advice — bargaining for super; Fund representatives — bargaining for super; 2004 super budget measures; MEAA members — Fairfax; TUC — UK pensions; Consultant conflict — US — AFL-CIO.

ACTU Superannuation Trustees Network Newsletter No.25
July / August 2004

EDITOR: Linda Rubinstein
Fax: 03 96634051

Union Super Power

The ACTU is holding a one day conference about campaigning and bargaining
around super.

The conference will be held in Sydney on 14 September and
repeated in Melbourne on 21 September.

Speakers and panel discussions
will cover topics including:

  • Where are we now?
  • Building up workers’ super
  • Building the industry funds
  • Union super power at work
  • Workers’ capital – is it working?
  • Charting a new path for corporate campaigning
  • The conference
    is designed for elected union officials, organisers, industrial officers and
    union super trustees.

    For more information and registration contact

    Union Members Care About Super

    In preparation for the Union Super Power conference the ACTU’s Member
    Connect conducted a telephone poll of union branch secretaries about attitudes
    to super.

    A majority of those polled said their members were very
    concerned about whether they would have enough to retire on, with another 39%
    saying members were somewhat concerned. Only 4% said members were not

    While most of those polled thought their organisers had high
    or medium understanding of issues such as the difference between for-profit and
    not-for-profit funds and the effect of fees and charges on members’ super,
    there was a substantial number describing organiser understanding as

    Understanding of the role of awards and agreements in
    super, and of the operation of salary sacrifice was relatively high.

    surprisingly, given its recent passage, 40% said their organisers had low
    understanding of the choice legislation.

    62% of the unions said they had
    campaigned for increased super contributions, with 64% claiming increased
    employer contributions and 32% a mix of employer and employee

    44% thought members would bargain for increased super,
    with a third saying they would not and a quarter responding “don’t

    Industry Funds Outperform Again

    Although final figures are not yet available, it seems that industry funds
    have brought in very solid performance for the 2003-4 financial year, well into
    double digits.

    Figure It Out, Alison

    ALP Financial Services spokesman Stephen Conroy recently quoted from an
    article by Alan Kohler which tells the hypothetical story of a young woman named
    Alison going to see a financial planner to choose a fund.

    “At the
    end of a spirited, persuasive pitch [the planner] solemnly intoned:
    ‘I must inform you, Alison, that the fee charged by the fund is 2.2%
    per annum, including an ongoing commission to me of

    “’Gee,’ said Alison. ‘That
    doesn’t sound much.’

    “’Well, Alison,’
    replies the planner, ‘You’re right – it doesn’t sound much.
    But under the regulations duly passed in 2004 I must also inform you that if you
    contribute 9% of your salary to the fund until age 65, and your salary increases
    by 5% per annum, and the fund earns a gross investment return of 8% per
    annum’ (by this time Alison’s eyes are quite glazed) ‘the total
    amount you will have paid in fees by the time you retire is $535,812, including
    $90,089 to me as your adviser. This represents an average of $992 per month
    during your working life including $172 a month to me.’

    While some
    fees are unavoidable, Labor’s commitment to ban entry and exit fees and
    commissions on compulsory SG contributions will significantly boost retirement
    savings for people like Alison.

    Choice Of Fund

    After eight years of talking about it, the Democrats passed the
    Government’s choice of superannuation fund legislation during the last
    frantic week of the parliamentary session.

    The legislation passed
    following agreement with the Government to treat all “dependency”
    relationships, including same-sex relationships, on an equitable basis for
    superannuation purposes.

    While ASFA and the Consumers Association raised
    serious concerns about the Government’s disclosure model for fees and
    charges, it has apparently satisfied the Democrats.

    Choice of fund will
    begin on 1 July 2005. From that date, employers will be required to give
    employees a form on which they can indicate their chosen fund.
    Choice will
    not apply to members of some public sector and defined benefit funds, and to
    those whose fund is specified in a state award, certified agreement or

    If the employee does not make a choice the award-specified fund will
    apply or, if there is no applicable award, the employer can choose the fund, as
    is currently the case.

    The legislation specifically prohibits funds and
    their associates (like banks) from offering inducements to employers on
    condition they sign up employees to their fund.

    The passage of the choice
    legislation highlights the importance of unions including the appropriate
    superannuation fund in certified agreements by 1 July next year.

    Superannuation Guarantee Earnings Bases

    Following the Treasurer’s announcement earlier in the year that the
    exemption for pre-19991 SG earnings bases would be removed by 2010, Parliament
    has legislated for this to occur in 2008, reflecting another Government
    agreement with the Democrats.

    The ACTU and a number of unions,
    particularly the mining division of the CFMEU, have campaigned for this change,
    as there are cases where employees are not receiving the full SG due to the
    definition of “ordinary time earnings” in applicable awards,
    agreements, superannuation trust deeds or legislation being inferior to that in
    the SG legislation.

    The campaign for immediate change will continue,
    with hopes that Labor will agree to this should it be elected.

    Talking About Super

    The new financial services licensing regime makes superannuation funds liable
    for their representatives who give financial advice without having met required
    training, disclosure and conduct standards.

    Who Are Fund Representatives?

    A union official who is a director of a superannuation fund trustee is
    automatically a fund representative. In some circumstances, a union official or
    delegate who is not a trustee might be taken to be acting on behalf of a fund:
    for instance, if the official or delegate is a member of a union which is a
    sponsoring organisation of the fund and is actively seeking to persuade
    individual employees to leave or place their superannuation with that particular

    What Is Financial Advice?

    First of all, a union official or delegate is not giving financial advice
    when engaged in collective negotiations about the superannuation fund to apply
    to employees generally. Arguing for an industry fund to be specified in a
    certified agreement or for the employer’s corporate fund to be outsourced to an
    industry fund is not giving financial advice.

    Financial advice is a
    statement or opinion intended to influence a person to make a decision in
    relation to a financial product. Advice can only be given when the recipient
    has a discretion or choice about the financial product they will use.

    Should union officials and delegates give financial

    Unless they have received some training, it is best for union organisers and
    delegates not to give financial advice.

    This does not mean, however,
    that officials and delegates cannot talk about industry funds. It just means
    that they should stick to the facts, rather than give opinions and

    Union officials and delegates can:

  • Give factual details of industry fund administration fees, insurance costs
    and investment returns;
  • Describe features of industry funds such as member investment choice and
    access to home loans;
  • Tell members that many funds run by banks and insurance companies charge
    commissions, and some do this every year;
  • Give comparative figures for different funds reported by industry
  • Union officials and delegates who might be seen as
    representing a fund and have not received some training should avoid:

  • Giving their opinion about whether any fund is better than any
  • Telling members their retirement benefits are likely to be better in an
    industry fund with lower fees and thereby seeming to endorse that
  • If this type of general advice is needed it can be
    provided by the relevant superannuation fund and their representatives who can
    provide financial product advice.

    Union officials and delegates should
    never give individual advice to individual members about what they, as
    individuals, should do in relation to their superannuation.

    2004 Super Budget Measures

    The ACTU put its concerns about the Government’s expansion of the
    co-contribution and decrease in the surcharge to the Senate Economics Committee
    inquiry last month.

    The ACTU is strongly opposed to reducing super tax
    for the highest paid employees, but not for most workers.

    While the
    expanded surcharge will support more employees making voluntary contributions,
    the reality is that the scheme is likely to be most attractive to those earning
    low incomes but who are members of relatively high income families.

    legislation has gone through Parliament, with the Government agreeing with the
    Democrats to reduce the surcharge to 10% rather than the original proposal of
    7½% by 2005/6.

    Who Gets The Co-Contribution

    The Federal Government has recently extended its co-contribution, so that
    workers who make super contributions from their after-tax incomes of up to $1000
    in a financial year will receive a matching contribution into their
    superannuation accounts.

    Workers on incomes up to $28,000 pa receive 150
    per cent of their contribution; that is, if they contribute $1000 they will
    receive a co-contribution of $1500. The co-contribution begins to phase down by
    5 cents for every $1 of income over $28,000 and ceases to apply once incomes
    reach $58,000. An employee earning $35,000 pa, for instance, would receive
    $1150 for a $1000 contribution, an employee on $45,000 would receive $650 and an
    employee on $55,000 would receive $150.

    The ACTU believes that the
    co-contribution applies to employees making after-tax compulsory contributions,
    whether to defined benefit or accumulation funds.

    MEAA Move For EGM Moves Fairfax

    When Fairfax announced it would be making up to 45 senior journalists
    redundant, MEAA members (many of them shareholders) began to collect signatures
    for an EGM.

    The purpose was to consider resolutions calling upon
    directors to protect the quality and credibility of the newspapers and the long
    term value of the company rather than implement cost cutting.

    Before the
    meeting was called, however, agreement was reached that there would be no
    compulsory redundancies.

    TUC Marches For Pensions

    The British TUC’s Pay Up for Pensions campaign went on the march in
    London last month in support of its demand for compulsory employer pension

    With no compulsory scheme, and employers abandoning their
    defined benefit funds, fewer than half of workers under 30 have started
    contributing to a pension.

    Consultant Conflict

    The US Securities and Exchange Commission is considering regulating to
    prevent asset consultants from taking benefits, directly or indirectly, from
    fund managers.

    Asset consultants advise funds on manager selection, a
    process which should require total independence.

    The SEC is concerned
    that some consultants receive inflated fees for conference registrations,
    research services sold to managers, performance reports, training courses,
    participation in data bases and the like.

    The AFL-CIO’s Center for
    Working Capital suggests that trustees ask detailed questions of consultants
    about their links with managers.