ACTU renews call for Treasurer to block CBA super takeover

The country’s largest labour union peak body has called on Treasurer Josh Frydenberg to immediately block the private equity takeover of Commonwealth Bank’s superannuation fund after it failed a performance test and was sued for providing false information to members.

Colonial First State (CFS) was one of 13 superannuation funds that failed the Australian Prudential Regulation Authority’s (APRA) inaugural performance test this month which ranks MySuper products on investment returns and fees against a tailored benchmark.

The ACTU has made another appeal to block private equity firm KKR’s takeover of the Commonwealth Bank’s super fund, Colonial First State. Credit:ACTU

The worst-performing funds, including CFS, must now inform members of the result and seek to improve returns, reduce fees or face a ban on accepting new members. The test is part of the federal government’s reform agenda to stamp out dud funds from the $3.3 trillion superannuation sector.

CBA announced last May it had reached a deal to sell 55 per cent of its super fund, Colonial First State (CFS), to KKR for $1.7 billion, which would give the private equity firm controlling ownership of the fund.

The deal is pending approval from the federal government’s Foreign Investment Review Board, and the Australian Council of Trade Unions (ACTU) called on Mr Frydenberg to block it in March, highlighting KKR’s “aggressive track record” for stripping costs to boost profits.

However, ACTU assistant secretary Scott Connolly said he received no reply and has now sent another letter, obtained by The Age and Sydney Morning Herald, claiming it was “more urgent than ever” for Mr Frydenberg to intervene and block the transaction.

“The Commonwealth Bank’s selection of KKR as the sale partner cannot be in members’ best financial interest and permitting it would simply be perpetuating the rapacious culture of siphoning workers’ hard-earned retirement savings for profit,” the letter claims.

“Australian workers’ retirement savings are not the playthings of foreign-based private equity pirates and the government should immediately reject the sale of Colonial First State to KKR.”

CFS’s MySuper products returned on average 22.4 per cent over the 12 months to June and a spokesman said while the group was “obviously disappointed” it had “narrowly missed” passing APRA’s performance test, he said changes had been made, including fee reductions to save members $8 million per year starting in October.

“As we establish CFS as a standalone business, CBA and KKR intend to make significant investments in CFS to make sure it emerges as one of the most competitive superannuation and investments businesses in Australia,” the spokesman said.

A spokeswoman for KKR said the firm “upholds its role as a responsible steward of investors’ capital extremely seriously and ensures the highest governance standards in its global portfolio of companies”.

“KKR believes it is an exciting time for CFS and looks forward to working closely with CBA to invest in CFS’ growth and making it one of the most innovative superannuation and investments businesses in Australia, which will bring many benefits to its members.”

Mr Connolly said the ACTU’s objection to the KKR deal is designed to test the government’s commitment to ensuring super funds act in the best financial interests of members, introduced in June through the Your Future Your Super bill.

“The new requirements of the best financial interest test is a hurdle too high in our minds for this deal to be reconciled with,” Mr Connolly said, adding he also wanted the deal to be blocked to discourage private equity ownership of superannuation assets.

“Our position is absolutely one where we question, with good reason, the profit motive with peoples’ retirement savings. That only gets worse if it’s global monsters that are motivated by nothing other than extracting as much as they can from the acquisition.”

The Federal Court also found last week CFS had engaged in misleading and deceptive conduct between 2014 and 2016, by providing false information to its members about switching funds. Australian Securities and Investments Commissioner (ASIC) deputy chair Sarah Court criticised CFS for keeping members in “higher fee-paying super products that included commissions”.

The CFS spokesman said the fund “has apologised unreservedly” to those impacted and said remediation was expected to be finalised by October.

Mr Frydenberg declined to comment.

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