Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Hansard source

This is at odds with the government's own Cooper review into superannuation. Recommendation 1.2 of the Cooper review in relation to MySuper and modern awards states:

The SG Act should be amended so only a MySuper product is eligible to be a ‘default’ fund nominated by an employer.

In recommending universal eligibility of default funds for industrial purposes, recommendation 1.3 states:

(b) all MySuper products are able to be nominated,

for ‘default fund’ purposes in awards approved by Fair Work Australia.

The coalition is of the view that, in creating this new default superannuation product, all MySuper funds should be allowed to be an eligible default fund for any workplace and should be able to compete freely. Not allowing MySuper funds to compete on a level playing field fails to address the existing competition issues in the default super industry and undermines these reforms. Even the government had to recognise before the last election that the current process, which heavily favours industry superannuation funds, is not open, transparent or competitive.

In August 2010, the government promised that a re-elected Gillard government would ask the Productivity Commission to design a transparent, evidence based and competitive process for the selection of default funds under modern awards. Finally, in January 2012, Labor made good on its promise—that was a rare moment—and sent a suitable request to the Productivity Commission. This is too little too late, independent Madam Deputy Speaker.

The second issue concerns intrafund advice. The explanatory memorandum indicates that superannuation funds will be able to charge for expenses incurred in the provision of intrafund advice as part of their overall administration fees charged to all fund members of a product. Intrafund advice is clearly a type of financial advice yet there is no precise definition of intrafund advice inside this bill, nor is there a definition in the government's FoFA legislation. There is no limitation on what may constitute intrafund advice and there are no provisions determining who should pay for such advice in any of the proposed legislation.

The coalition considers that the lack of definition and lack of restriction on charging for intrafund advice within both the MySuper and the FoFA legislation is a mistake that must be rectified. In order to address these concerns, the coalition will propose an amendment to the bill to ensure that the purposes of the MySuper product— no financial advice fees—can be bundled into an administrative fee and automatically charged to all fund members. Specifically, this amendment will call on the government to, firstly, provide a comprehensive definition of the term 'intrafund advice'; secondly, ensure that intrafund advice is general in nature only; thirdly, ensure that any financial advice accessed within a superannuation fund beyond such general advice will be expressly subject to the best interests duty contained in the proposed FoFA legislation; fourthly, ensure that any financial advice accessed within a superannuation fund beyond general advice will be paid for by the person accessing this advice without any cross-subsidy from other fund members; and, fifthly, repeal the existing ASIC class order exemption as it would be superfluous once intrafund advice is properly defined in legislation.

The third issue of concern relates to the benchmark set for the tailoring of MySuper funds for large employers and the process to obtain a tailored large employer super fund plan. When an employer contributes to a fund on behalf of 500 or more members, the MySuper plan can be tailored to the needs of the employer and employee. Tailoring of MySuper plans makes sense. However, the coalition believes the benchmark requiring a minimum of 500 members per fund is too high and will create confusion among business. The coalition favours a simpler system, whereby a firm is classified as a large employer if it has 500 or more employees as opposed to members. This will provide certainty for business and for consumers. It will mean that MySuper plans tailored to the needs of employees are more readily available.

The process of tailoring MySuper plans for large employers is also problematic. The provision in the core provisions bill require prior authorisation of each tailored MySuper employer plan, rather than simply providing a reporting mechanism. The process of yearly reporting of compliance with MySuper licensing conditions for large employers makes much more sense. A solution proposed by the Financial Services Council suggested that MySuper plans could be reported to APRA on an annual basis. APRA would within 30 days be able to disallow a tailored plan where the tailored plan is not compliant with the licence conditions. This compromise will ensure that MySuper plans will be compliant with their obligations at law and would allow the regulator, APRA, to disallow a non-compliant fund. It would improve the ability of employers to tailor plans to the requirements of employees.

In conclusion, Madam Deputy Speaker, and I am grateful for your close attention to my speech, I can say that the coalition supports the introduction of a MySuper product in principle but believes the bill before the House can be improved. I indicate to the House that I will be moving a number of amendments to the bill when we come to the consideration in detail stage.

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