Paul Fletcher (Bradfield, Liberal Party) Share this | Hansard source

I am pleased to rise to make a contribution as we consider in detail the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012 and, in particular, the amendment moved by the opposition to remove the specific provisions that give effect to the scale test, which we on this side of the House think is ill considered.

There is no dispute from this side of the House with the central proposition that what we all ought to be concerned about is the optimal and efficient operation of superannuation funds and making sure that trustees and others charged with the operation and management of superannuation funds do so in a conscientious and effective way. We on this side of the House have difficulty with the issue that the relevant provision—proposed section 29VN—would have the effect of baking into the law of the land an assumption which we consider is contentious and not well made out—that is, the assumption that bigger is always better when it comes to the size of a superannuation fund. The minister told the House earlier that there was no assumption that bigger is somehow better behind this new provision. If there is no such presumption it is very simple: take the provision out—because, by putting into black-letter law an obligation upon trustees to consider the scale of the fund every year, what you are doing is imposing upon them the obligation to consider the merits of the proposition that a bigger fund is better. If that is not a proven, well-made-out assumption—if finance theory, among other things, does not provide a good basis for that assumption—then you should not be legislating on the basis of that assumption.

That brings up the obvious question: why is the government legislating on the basis of this assumption? What are the merits behind this idea? Why is it reflected in this piece of legislation that the House is considering today? It is very instructive that the Australian Institute of Superannuation Trustees, which represents all superannuation trustees including trustees operating in industry funds as well as every other kind of superannuation fund, had this to say to the Parliamentary Joint Committee on Corporations and Financial Services:

While accepting that scale may provide benefits to members, AIST confirms the position we put before the Committee. That is, the pursuit of optimal net returns to members having regard to risk considerations and the safe stewardship of members’ benefits should [be] the overwhelming obligation upon trustees of MySuper products, and this obligation should not be clouded, diminished or distracted by other considerations including scale.

The body which speaks for trustees of superannuation funds is saying that as a matter of black-letter law, drafting and policy it is a bad idea to put into law a formal obligation upon trustees of superannuation funds to give consideration specifically to the question of scale.

Of course superannuation trustees must always have regard to delivering the best outcomes for members of the fund—that is not in contention. What is in contention before the House today is whether it is good policy and good law to impose a specific obligation upon superannuation trustees to have regard, on an annual basis, to the matter of scale. On this side of the House we say that is a bad idea. That is not a good element of this piece of legislation and that is why we are moving this amendment. There is a host of good policy reasons to argue against it, and if I have time in another contribution I will make some broader observations, but I want make very clear this specific point: we do not contest that superannuation trustees have an obligation to fund members. Of course they do. What we contest is the legislative drafting stratagem of putting this specific duty in the bill. We say that is a bad idea.

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