Australia's $2.6 trillion superannuation industry is operating in the dark without a dedicated regulator to shine a spotlight on the trustees running the funds, an inquiry has heard.
The key question for the financial services royal commission's investigation into the "opaque" superannuation industry is: "What happens when we leave these trustees alone in the dark with our money?"
It is difficult, if not impossible, for Australians to detect if a trustee's conduct has affected the amount they have left for retirement, senior counsel assisting the commission Michael Hodge QC said.
Mr Hodge highlighted holes in the regulatory oversight of the industry by the Australian Prudential Regulation Authority and Australian Securities and Investments Commission.
APRA is a prudential regulator and ASIC considers its jurisdiction in relation to superannuation trustees is limited.
There is no dedicated conduct regulator for superannuation trustees in Australia, Mr Hodge said.
"So if consumers are unable to do anything more than peer dimly through the darkness of their superannuation trustees and there is no dedicated and active conduct regulator shining a spotlight on the trustees and searching out bad behaviour, that leaves us with the third possible safeguard of Australians' retirement savings - reliance on compliance by the trustees themselves with their duties and legal obligations."
Mr Hodge said trustees have a duty to maintain the fund for the sole purpose of providing retirement benefits and to act in the best interests of members.
But, he said, trustees are surrounded by temptation, including to choose profit over the interests of members and to preference the interests of their sponsoring organisations.
The commission will spend more time publicly examining the conduct of retail funds than industry ones during the two-week hearing.
As part of the inquiry's call for documentation, Mr Hodge said some industry funds had to produce credit card statements and documents from sponsoring unions or employer organisations.
He said on the whole, the commission's review of documents found fewer examples of industry fund trustees engaging in misconduct, conduct falling below community standards or inappropriate use of retirement savings, when compared with retail funds.
"In a number of cases, though certainly not all, the conduct of the industry funds which we have identified as warranting consideration during the oral hearings is very nuanced."