The chief executive of $70 billion fund HESTA says there is deep inequality in the superannuation system, calling on the government to use this year to introduce measures such as super on paid parental leave and a cap on balances to curtail generous tax concessions for the wealthy.
Debby Blakey, the head of the industry fund which caters to almost 1 million members in health and community services, said paying superannuation on paid parental leave had industry support as a way to help close the super gender gap, but a lack of action on the issue was sending the wrong message.
“I don’t think it’s just about the dollars. I think it’s also the message that sends about unpaid caring work,” she said. “Sometimes you have to do things because they are the right thing to do. I think this falls into that category.”
Adding superannuation to the government’s paid parental leave scheme was a pledge Labor took to the 2019 election, however it has since shelved any immediate plans, saying while it still supports the idea it is unlikely to happen in its first term.
But Blakey said reforms to address inequity should be enacted this year.
“This is the year,” she said. “It will be interesting to see what the government chooses to prioritise. Because there’s obviously a huge amount to do. But … there seems to be a very strong appetite to address it. I would love to see us capitalise while there is that strong appetite.”
Other reforms HESTA is agitating for include a boost to the low-income super tax offset, up to $45,000 – so it aligns with the tax thresholds – and the introduction of a carer’s credit, which exists in the UK and would provide paid superannuation for those out of the workforce looking after small children.
HESTA also supports a cap on super balances, an issue the government has been actively looking at to address concerns that those with large super balances are benefitting from generous tax concessions more than those with modest balances.
“The fact that there are around 11,000 Australians who have more than $5 million in super, that’s not what super is meant to be about,” said Blakey. “It’s an uncomfortable topic … because it can feel quite personal. But we would definitely support that being addressed.”
‘I don’t think it’s just about the dollars. I think it’s also the message that sends about unpaid caring work,’Debby Blakey, chief executive of HESTA
Blakey pointed out that someone with $5 million in super would receive about $70,000 a year in tax concessions – more than many HESTA members earn in a year, with a third of the fund’s members earning below $50,000 a year.
“The government is giving a concession of $70,000 to people who you really would question if they need that,” she said.
Another focus for HESTA this year, Blakey said, was increasing its engagement with companies to drive action on climate change. The fund made waves last year when it declared it would use its small stake in AGL to side with tech billionaire Mike Cannon-Brookes and vote against the planned demerger of the energy company’s coal-fired power generation business, arguing the move would not help decarbonisation of the economy.
In September, the fund placed four of Australia’s largest energy companies on a “watch list”, chasing them for firmer guidance on their stated plans to meet the goals set by the Paris Agreement. Origin has since been removed from the list, but Blakey said conversations with the other companies were ongoing.
“I think they clearly understand what it is we are seeking. I think how they’re strategically addressing that for some of them, it’s still a work in progress,” she said.
Is this kind of outspoken activism what members want from their super fund? Blakey is adamant it is.
“We are increasingly seeing Australians who want to be in a fund that takes a stand on issues that matter for the future, be that climate change, be it gender diversity,” she said.
“We will have small pockets of members who want us to do more, who want us to do it differently, who perhaps want us to divest. We believe very strongly that the bigger impact we can have is actually through remaining invested and engaging actively. But there is sometimes a different view.”
Last year was a rocky one for super funds, with a volatile market making it harder to achieve positive returns. Many funds posted negative returns for the first time since the GFC. Median growth funds were down about 4 per cent for the year, according to Chant West, meaning the average balance of $145,670 will have lost $5286 over the calendar year.
HESTA was not spared. Its balanced growth option was down 3.71 per cent in 2022, though still up 6 per cent over the past five years. While acknowledging ongoing issues of geopolitical instability, the energy crisis, inflation pressures and interest rate rises, Blakey is hopeful this year’s June results will show much stronger returns.
“The challenge for us is inflation, high levels of inflation and obviously, the rising interest rate market has not helped. And there’s still so much uncertainty with the geopolitical situation. So I think it’s very hard to predict,” she said.
Blakey said the fund aimed to reach $100 billion under management in coming years, and was undergoing a process of building its internal capability to manage choppy markets, including in areas such as Australian equities, fixed interest, and cash.
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