It is early evening in Australia when Senator Jane Hume rings from Canberra, the country’s capital, and begins our interview with an apology for being late.
“My last call ran over,” explains Ms Hume, assistant minister for superannuation, financial services and financial technology in Australia’s Coalition government, adding she faces “a Zoom marathon” that evening.
Senator Hume can be forgiven a little tardiness.
Days before, her government had unveiled the biggest reforms to the country’s A$3tn superannuation sector in decades, with the shake-up aimed at delivering A$18bn in savings for the nation’s 16m retirement savers who have been “let down” by poor performance and high fees.
Ms Hume has spent the past few days batting off criticism of the reforms, which were sprung on the industry, the fourth-largest in the world by assets under management, without consultation.
“Compulsory superannuation has been around for nearly 30 years,” says Ms Hume. “It’s a system that has served us well, but it has been plagued with inefficiencies, things like very high fees.”
Her role in shaking up Australia’s superannuation system comes just four years after she entered politics as a self-declared “economic hardhead” with no media profile or political pedigree but a determination to “put consumers at the heart of everything we do”.
“I come to this place with high hopes — but I am a realist, a pragmatist and a workhorse,” she said in her maiden speech to the Australian parliament in 2016. She was appointed to her ministerial role in May last year, the first female to have superannuation in her portfolio title.
Jane Hume’s CV
Born 1971 Melbourne, Australia
Salary $264,000 (AUS)
1989-92 Bachelor of commerce, accounting and economic history, University of Melbourne
2003-06 Graduate diploma of arts, political science, University of Melbourne
1999-02 Various roles with Rothschild Asset Management
2008-09 Vice-president, Deutsche Bank
2014-15 Director, Fed Square
2015-16 Senior policy adviser, AustralianSuper
2016 Elected to Australia’s upper-house Senate
2019-present Assistant minister for superannuation, financial services and financial technology
The 49-year-old pivoted into politics after nearly two decades working in various high-level finance roles including as a private banker, vice-president at Deutsche Bank, and a senior manager at Rothschild Australia. She also had a “genuinely eye-opening” stint as a policy adviser in the superannuation sector.
“It is terrific to have that credibility with stakeholders (because of my background),” she says. “But more importantly, superannuation is very complicated and it’s terrific to feel that the industry itself cannot pull the wool over my eyes.”
She arrived into her ministerial role with firm views about the superannuation industry, which had mushroomed over the decades to include hundreds of funds, such as industry, retail, public sector and corporate funds.
“The industry superannuation sector in Australia does an enormous amount of good work but it is a very segmented industry,” said Ms Hume.
“There are so many super funds out there that the problem is that there isn’t actually genuine competition because of the ties to the industrial relations system.”
The reforms by the Coalition government, an alliance of conservative Liberal and National parties, will go a long way to dismantle the dominance of so-called industry funds, or not-for-profit schemes, which were originally set up by trade unions to service workers in specific sectors, such as retail or media.
“These are by far the most well-funded and noisiest of the lobby groups,” says Ms Hume.
One of the most significant reforms will tackle an estimated A$100bn of cash in underperforming funds, by ensuring workers are no longer defaulted into the super plan chosen by their employer, a system which has led to up to 6m multiple accounts with 3m of those languishing in so-called dog plans.
In addition, from next July, superannuation funds will be subjected to annual benchmark performance tests, with underperforming plans blocked from receiving new members until they improve. Underperforming funds will be also shamed on a new online tool that will allow Australians, for the first time, to compare the performance and fees of all “My Super” or default pension products.
Ms Hume defends the measures being imposed on a savings system that is regarded as world class, saying without the changes Australians could be paying A$45bn in super fees annually by 2034, up from A$30bn today.
“For too long, superannuation was spoken about as an industry rather than an essential service, which is exactly what it is. Because of that, I think the government has a right to expect it is managed well on behalf of the citizens.”
Not content with simply driving up efficiencies in the system, new measures will also influence the investment decisions of funds, which have tilted to infrastructure and to taking a stand on climate change. Under the reforms, trustees will face stronger requirements to act in the best financial interests of members.
“Some of these funds, they do great things, they invest in terrific things like roads and bridges and airports but that is not the sole purpose of superannuation,” she says.
“They can advertise by saying they invest in wind farms but they are not there to turn the lights on. The purpose of superannuation is to build savings for retirement or to create an income for retirement.”
This measure to act in the best “financial” interests of members has stoked tensions with the industry, which fears it will drive them out of infrastructure investing. But she says this is “not necessarily” a desired outcome.
“If they feel there is an illiquidity premium available by investing in infrastructure, then that is fantastic, but funds need to remember that they are not investing in that infrastructure to create jobs or rebuild the economy after Covid-19 or any of those things, they are doing it purely for the investment returns.”
When asked whether the Australian government would support funds striving to meet climate change responsibilities, she was equally as staunch.
“The mission of a super fund is not to change the earth’s temperature it is to create a return on investments for those individual members.”
Ms Hume says the reforms may result in fewer funds, as poorer performers are weeded out, but consolidation was not the objective of the changes.
In the interim, Ms Hume faces a backlash. The Labor opposition says the changes fail to protect consumers as they only measure half the fees and will therefore fail to weed out poorly performing funds. The industry says the plans lack detail.
But she shrugs off the criticism.
“Almost every time we try to make the superannuation system more efficient and cost less, we do get some push back, particularly from the opposition,” she says.
“That said we have been very successful in getting our reforms through because it is very hard to argue with lower fees, it is very hard to argue with transparency and accountability and members’ interests.”