Superannuation Body Will Become the ‘Lexcorp’ of Australian Economy: Senator

Australian Liberal Senator Andrew Bragg reacts in between divisions in the Senate chamber at Parliament House in Canberra, Australia, on Feb. 9, 2023. AAP Image/Lukas Coch

A small but powerful group of superannuation funds are becoming a dominant force in the Australian economy and would have a major impact on the country’s retail investors, an Australian senator has warned.

The comment came in response to the creation of the Super Members Council (SMC) of Australia in September, 2023, a lobby and policy body formed by eight of Australia’s biggest super funds.

These are AustralianSuper, Cbus, Hostplus, Aware Super, Australian Retirement Trust, UniSuper, REST, and HESTA.

The lobby group—chaired by former health minister and attorney-general Nicola Roxon—consists of representatives of profit-for-member funds, non-voting directors from the Australian Council of Trade Unions, and employer groups.

Profit-for-member funds are industry super funds in which profits are put back into the fund. It makes up more than 50 percent of the country’s $3.5 trillion (US$2.35 trillion) super industry.

SMC is expected to have considerable influence over the government and the capital markets as it represents more than $1.4 trillion in the retirement funds of over 10 million Australians. It would also work with political leaders to deliver retirement outcomes for members.

Big 8 Would ‘Lobby For Their Interests’: Bragg

Andrew Bragg, chair of the Senate Economics Committee argued that the SMC would become a powerful unified block that would own “a very large chunk of Australia’s companies” and therefore have a significant influence on everyday retail investors.

He described the lobby group as the “Lexcorps” of the Australian economy, a name of a fictional organised crime company that appears in American DC comics.

“The Lexcorps of our time are getting organised,” he wrote in a commentary in The Australian.

“This means they will be co-ordinating to lobby for their interests. Note this will be the interests of the funds themselves, not the members of the funds.”

Mr. Bragg pointed to an example where the union-aligned AustralianSuper used its influence to block energy giant Origin’s $20 billion proposed acquisition.

Mr. Bragg alleged that the action was politically motivated and that there was “risk of union interference in the funds.”

He suggested a number of reforms are needed to prevent the abuse of power, such as expanding the remit of the Takeovers Panel, or preventing APRA (Australian Prudential Regulation Authority) regulated super funds from owning more than 10 precent of public companies.

Political Motivations

This is not the first time a politician has warned about the risk of super funds. In 2023, Queensland LNP Senator Gerard Rennick described superannuation as “the worst thing to ever happen to the economy in this country.”

“Where our corporations have gone wrong over the last 30 years is that they’ve been taken over by these fund managers,” Senator Rennick told ADH TV on Sept. 5.

“When was the last time you actually voted, if you were in a retail fund or an industry fund, for the people who run those boards? Of course, no one gets to vote for those people. They’re selected, not elected,” he said.

Senator Rennick also said the Western corporations that super funds held stakes in were more focused on politics than achieving optimal returns for shareholders.

The SMC, which states that equity is a key principle in the object of superannuation, supported the government’s decision in 2023 to impose a tax of 15 percent on accounts exceeding a $3 million threshold to boost the budget bottom line.

It argued (pdf) this was consistent with the goal of superannuation to “preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.”

While Labor claimed the tax would affect a small number of Australians, government estimates revealed the number of people who will be affected by the new tax over time is more than 10 times higher than what Labor have disclosed, leading to criticism from the opposition about the lack of transparency.

“In 30 years, Treasury projects that roughly only the top 10 percent of earners will retire with superannuation balances around $3 million (US$1.975 million) or more,” said Labor Finance Minister Katy Gallagher in March 2023.

Nick Spencer contributed to this report.