Superfund? Or Super funding carbon emissions?

29/08/2018   Aaron Walshe, Paraplanner

In late July the news broke that Queenslander Mark McVeigh, a young man with a degree in ecology, was taking his industry superfund manager to court for its inaction on climate change. The story didn’t quite get the traction it deserved as most people weren’t interested in headlines that made the issue out to be a case of ‘another millennial complaining about climate change’. While that isn’t completely untrue, this issue runs much deeper and everyone should know why it relates to them.

For a lot of people, superannuation is a bit of a mystery. Even the most basic questions can confound the average worker: What company is your super invested with? What investment model are they investing your money into? What investment products do you own inside your superannuation?

As a long-term lifetime asset made up of 9.5% of every dollar the average worker has ever made, superannuation really should command more attention from Australians. And that is what this legal battle is about, a demand for information.

Superannuation funds including industry funds, retail funds and self-managed super funds, are all trusts. This may seem like a fancy legal term, but it merely describes a relationship. In this case the trustee (the superfund) is under an obligation to hold and invest superannuation moneys in trust on behalf of the beneficiaries (Australian workers) until such time as they have retired and are eligible to withdraw their hard earned savings. The important point here is that the superfund never owns the money, they are simply the custodians of the money for a period of time.

As trustees hold a position of significant power over beneficiaries, they are subject to strict legislative rules. These include acting with care, diligence and skill, and reviewing the performance of the trust investments once a year. However, there is also a lot of old case law that influences the management of trusts. Mr McVeigh will be relying upon an old ruling that stated that beneficiaries have a right to information which pertains to their property.

As the industry superfund is holding his money in trust, he argues that he has a right to know what the company’s long term strategy to deal with climate change is. It is an interesting argument as the Australian Prudential Regulation Authority has already recognised climate change as a “defining issue for financial stability”.

Should the superfund reveal they have no strategy, could they be found to have failed their duty to act with care and diligence? Do you know what strategy your superfund is using to best benefit you in the future?

As the royal commission turns its gaze towards the superannuation sector, Australia will soon find out why Superannuation companies are so eager to hide information for their customers.

When the mystery that is the superannuation industry is compared to the experience that financial planning clients have when they take control of their own super; the differences are amazing. Financial advisers are subject to requirements to act in their client’s best interests by finding out what clients want to achieve and what levels of risk a client is comfortable with. Moreover, with every statement of advice produced all the research for every investment recommended is provided to the client to review.

If control and clarity around your super appeals to you, contact a financial adviser today.

General advice warning: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances.

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