Paul Fletcher (Bradfield, Liberal Party) Share this | Link to this | Hansard source

I am pleased to rise to discuss the question of governance standards in the superannuation sector with particular reference to Local Government Super, the fund with responsibility for over $5 billion of the retirement savings of some 90,000 local government employees in New South Wales. Local Government Super has delivered rather unimpressive returns in the most recent financial year. According to the most recent performance rankings from Chant West, the respected ratings firm, the LGSS Balanced Growth fund ranked 51st out of 62, with a return of minus 0.9 per cent for the year to 30 June 2012.

This raises a number of interesting questions. First, LG Super recently released a media release trumpeting that it had been awarded as Money magazine's Best Green Super Fund 2012. What priority does LG Super attach to green investing as opposed to generating good returns for its members? Next, LG Super is named as a member of Businesses for a Clean Economy, which ran full-page advertisements in national newspapers in early July expressing support for the carbon tax. Did LG Super contribute to the cost of this advertisement and, if so, how did this serve the interests of members in maximising their retirement savings?

Next, what is the approach being taken by the Investment Committee of LG Super, chaired by a Mr Ian Robertson, of the Development and Environmental Professionals' Association, and on which Mr Sam Byrne, a former Greens councillor on Marrickville Council, also serves? Mr Byrne, the ex Greens councillor, is supposedly an employer representative under the so-called 'equal representation model' under which LG Super unfortunately labours. How can this be meaningful when he is no longer actually on a council?

Next, how representative in reality is the current model for appointing directors, under which four are appointed by the Local Government Association of NSW and the Shires Association of NSW between them, two by the United Services Union, one by the Development and Environmental Professionals' Association and one by the Local Government Engineers' Association? How many of the over 90,000 members of LG Super are members of the Development and Environmental Professionals' Association, which is rather a small union? More broadly, how representative is such a model of the interests of employee members of the scheme, given that unionisation in the local government sector is declining and across the workforce at large stands at only around 18 per cent of employees?

Next, what is the expertise in investment management amongst the eight members of the LG Super board? How many of its eight directors have formal qualifications in, or extensive business experience in, managing large pools of financial assets? With directors receiving fees of between $40,000 and $60,000, do the union officials on this board, such as Mr Graeme Kelly, General Secretary of the United Services Union, and Mr Ian Robertson, Secretary of DEPA, pass on their fees to the union which appointed them, or do they regard the fee as a nice little supplement to their earnings as union officials?

LG Super formerly owned half of a company called FuturePlus Financial Services Pty Ltd, before selling it to the Energy Industries Superannuation Scheme. What is the price at which that sale occurred, and how successful an investment was FuturePlus for members of LG Super? For a number of years FuturePlus Financial Services was appointed to provide administration services to LG Super. Was this appointment subject to a competitive market process to test whether the members of these funds were getting the best possible value?

Next, how much did LG Super pay in 2004 when it purchased Local Government Financial Services? Did LG Super inject funds into this company in 2009, and was this a wise use of members' funds and likely to maximise their retirement savings?

Next, why did APRA refuse to grant a freedom-of-information request made in 2011 by the Northern Sydney Regional Organisation of Councils seeking further information about the nature of reviews conducted by APRA into the operations of LG Super?

Next, why has the Minister for Financial Services and Superannuation, Minister Shorten, refused to act on the recommendations of his government's own Cooper review regarding governance standards in the superannuation sector, including a recommendation that the so-called equal representation model—which is code for unions having a privileged role in the governance of superannuation funds—should no longer be mandatory? The review also recommended that, where equal representation does apply, there should be at least one-third of directors on the board who are independent and that directors who want to sit on multiple boards must demonstrate to APRA that they do not have any foreseeable conflicts of interest. Has LG Super achieved standards of governance which are satisfactory, given its vital task of stewarding the retirement savings of its members, and would those standards be lifted if Minister Shorten had acted on the recommendations of the Cooper review?

All of these are important questions, and I believe they are questions that members of LG Super and others with an interest in public policy in this area would like to see answers to.