8.1 Background

Hostplus Pty Limited (Hostplus) is the trustee for the Hostplus Superannuation Fund.[1] Hostplus is a profitformember industry superannuation fund that was established in 1988 by the Australian Hotels Association and the Liquor, Hospitality and Miscellaneous Workers’ Union (now United Voice).[2] Most of its members work in the hospitality and tourism industries.[3] As at August 2018, Hostplus had approximately $34.5 billion in funds under management and just over 1.1 million members.[4]

The Commission looked at two aspects of Hostplus’ conduct:

  • its use of funds on corporate hospitality to attract and retain employers; and
  • its retention strategies to retain members in the fund.

The Commission heard evidence from David Elia, who has been the Chief Executive Officer of Hostplus since 2003.[5]

To put the conduct in its proper context, I should explain three matters.

The first is that Hostplus is a high performing superannuation fund.[6] Mr Elia said that the Hostplus default option had been the top performing default product in Australia based on return on investment (net of fees and taxes) over the period of 1, 3, 5, 7, 15 and 20 years.[7]

Second, Hostplus’s members tend to be young and disengaged, with low superannuation balances. At the time of Mr Elia’s evidence, the average balance was approximately $30,000, less than half the industry mean.[8] Almost 50% of Hostplus’s members had a total balance of less than $6,000.[9] At 30 June 2017, 296,898 member accounts were ‘inactive’: that is, no contribution had been received in the preceding 12 months.[10] The fund’s members are largely young people who have recently entered the workforce, are employed on a casual or part-time basis, and who regularly change employment.[11]

The consequences of disengagement and low balances can be significant. For example, the Commission received a half-yearly member statement dated 30 June 2017. The statement showed that the member had not made any contributions to the account during the previous six months. The member had received net investment returns of $83.91, paid administration fees of $39 and insurance premiums of $565.59, and had a closing balance of $1,216.54.[12] If the member did not act, their account balance would reduce.[13]

The third point to notice is that Hostplus has two sources of revenue.[14] The first is administration fees collected from members. The second source is a tax benefit that Hostplus receives on members’ insurance premiums.[15] The benefit arises because Hostplus collects 15% of every taxable superannuation contribution, but in some circumstances is entitled to tax deductions. As a result, not all the 15% it collects needs to be remitted to the ATO. In practice, this benefit yields Hostplus an amount equal to 15% of the insurance premiums paid by members.[16] Hostplus retains these amounts in an administration reserve. As at May 2018, Hostplus’ administration reserve was forecast to hold a balance of approximately $172 million as at 30 June 2018.

At the time of the events described below, Hostplus’s revenue from the tax benefit was likely to significantly reduce. Proposed legislation would require members with balances of less than $6,000, under the age of 25, or who had not made a contribution in 13 months, to ‘opt-in’ to insurance. Over 670,739 members (paying 43% of total insurance premiums) would have their insurance cover end if this legislation was introduced,[17] reducing the benefit to Hostplus by approximately $14.5 million per year.[18] Further, Hostplus intends to comply with the Insurance in Superannuation Voluntary Code of Practice, which provides that insurance cover must end if no contribution has been made within 13 months.[19] Even without legislative change, this change would reduce Hostplus’s revenue.


[1] Hostplusis used to refer to both the trustee and the fund, unless otherwise indicated.

[2] Transcript, David Elia, 14 August 2018, 4844; Exhibit 5.321, Witness statement of David Elmslie, 26 July 2018, 4 [10], [16].

[3] Exhibit 5.321, Witness statement of David Elmslie, 26 July 2018, 4 [10]; Transcript, David Elia, 14 August 2018, 4844.

[4] Transcript, David Elia, 14 August 2018, 4844.

[5] Transcript, David Elia, 14 August 2018, 4843; Exhibit 5.172, Witness statement of David Elia, 1 August 2018, 3 [1], [10].

[6] Transcript, David Elia, 14 August 2018, 4845.

[7] Transcript, David Elia, 14 August 2018, 4845; Exhibit 5.172, Witness statement of David Elia, 1 August 2018, 11 [44].

[8] Transcript, David Elia, 14 August 2018, 4845.

[9] Transcript, David Elia, 14 August 2018, 4846; Exhibit 5.172, Witness statement of David Elia, 1 August 2018, 6 [19].

[10] Transcript, David Elia, 14 August 2018, 4846–7; Exhibit 5.172, Witness statement of David Elia, 1 August 2018, 6 [20].

[11] Transcript, David Elia, 14 August 2018, 48456, 4855.

[12] Transcript, David Elia, 14 August 2018, 4862; Exhibit 5.177, 30 June 2017, Member Statement.

[13] Transcript, David Elia, 14 August 2018, 4862–3.

[14] Exhibit 5.362, 15 March 2018, Draft Australian Asset Owner Stewardship Code, 106.

[15] Transcript, David Elia, 14 August 2018, 4859; Exhibit 5.176, 27 July 2018, Extract from CEO Report to Board Meeting, 17.

[16] Transcript, David Elia, 14 August 2018, 4859; Exhibit 5.176, 27 July 2018, Extract from CEO Report to Board Meeting, 17.

[17] Transcript, David Elia, 14 August 2018, 4859; Exhibit 5.176, 27 July 2018, Extract from CEO Report to Board Meeting, 17.

[18] Transcript, David Elia, 14 August 2018, 485960; Exhibit 5.176, 27 July 2018, Extract from CEO Report to Board Meeting, 17.

[19] Hostplus, Module 5 Case Study Submission, 1 [5].