Embattled industry fund EISS is in advanced talks with Cbus to merge into a $70 billion super giant after EISS was slapped with a warning from the prudential regulator following reckless spending allegations.
The Australian Prudential Regulation Authority (APRA) has given Energy Industries Superannuation Scheme (EISS) until July next year to merge with a larger, better performing fund after discussions with $6 billion transport fund TWUSuper collapsed in October.
EISS Super and Cbus are in advanced talks to become a $70 billion super fund for energy and construction workers. Credit:Tony Moore
APRA has placed increasing pressure on the $3.3 trillion superannuation sector to consolidate, forecasting smaller funds will become uncompetitive as economies of scale are used to reduce fees and improve returns.
EISS, also a $6 billion fund, was approached by the construction industry fund Cbus late last year, according to multiple sources who were not authorised to speak publicly, but this was rejected by EISS’s management which had prioritised finalising a deal with TWUSuper.
“EISS said we’re not interested. They made out it wasn’t in members’ best interests,” said one source. “But in reality, it wasn’t in the directors’ best interest, they didn’t want to be swallowed up by a larger fund. So, they fought it every step of the way.”
Now, Cbus and EISS have reignited merger discussions after an expenses crisis toppled EISS’s chief executive, chair and three senior directors. EISS staff have been told there will be job losses and possible re-deployments in the new year, once the deal, described as “more of a takeover than merger” with Cbus is finalised.
Cbus has begun advertising across a number of worksites of the NSW-government owned Essential Energy, according to sources, which is one of EISS’s major employers. Previously, Cbus has remained absent from these worksites but is now encouraging members to switch funds.
“That makes it hard for EISS as a business to maintain their membership or increase their membership if they’ve already got Cbus weaning their way into the energy worksites,” said another source. “Cbus has cottoned on, they’re trying to pick off the carcass.”
EISS’s former head of employer relationships, Paul Lister, started working at Cbus in April and has made a number of posts on social media encouraging EISS members to switch funds. “Anyone still in EISS Super? Time to consider alternatives – there are much better performing funds with much lower fees out there!” Mr Lister posted on November 16.
EISS said it revised its merger strategy in September and was “currently exploring a number of merger opportunities that will ensure our members’ interests continue to be protected in the long term” but did not comment on negotiations with Cbus.
A Cbus spokeswoman said: “We never comment on merger discussions.”
EISS was hauled in front of a parliamentary committee in October after The Age and Sydney Morning Herald revealed the $6 billion super fund had spent its largely blue-collar members’ retirement savings on training courses at elite US universities, lavish Christmas parties and $100,000 on a luxury BMW for the CEO.
The reports also highlighted potential conflicts of interest after EISS was found to sponsor a number of charities linked to senior managers’ family members and two Maroubra surf clubs neighbouring the former CEO’s residence in Sydney.
APRA this week intervened to impose additional licence obligations on EISS, forcing greater board oversight of expenditure and culling unnecessary sponsorship deals. The investigation remains ongoing and the regulator has warned further action may follow.
Former chief executive Alex Hutchison blamed a “calculated smear campaign” for his decision to step down from EISS after a factional battle within the aligned union, the Electrical Trades Union, had split support for a merger with Cbus and TWUSuper. There were two formal bullying complaints made against Mr Hutchison and a number of claims made through the Fair Work Commission and WorkSafe NSW about poor treatment at EISS which have resulted in financial payments being made.
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