Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Competition Policy and Consumer Affairs) Share this | Hansard source

by leave—I move amendments (1) to (10) as circulated in my name:

(1) Schedule 1, item 6, page 4 (line 4), after "29T", insert "or satisfies the provisions of section 29TB".

(2) Schedule 1, item 9, page 9 (line 14), omit "or 29TB".

(3) Schedule 1, item 9, page 9 (line 19), omit "or 29TB".

(4) Schedule 1, item 9, page 10 (line 33) to page 11 (line 5), omit paragraph 29TB(1)(b), substitute:

  (b) that employer is a large employer in relation to the fund (see subsection (2)); and

(5) Schedule 1, item 9, page 11 (line 28) to page 12 (line 4), omit subsection 29TB(2), substitute:

(2) An employer is a large employer in relation to a regulated superannuation fund if there are 500 or more employees of the employer, or an associate of the employer, at the time the beneficial interest in that class is first issued and at the end of each annual reporting period.

(6) Schedule 1, item 9, page 12 (after line 4), at the end of section 29TB, add:

(3) An RSE licensee with a MySuper authorisation must report the details of MySuper products for large employers to APRA on an annual basis. APRA may disallow a large employer MySuper product at any time where it does not comply with subsection 29TB(2).

(7) Schedule 1, item 9, page 14 (line 25) to page 15 (line 3), omit paragraph 29U(2)(b).

(8) Schedule 1, item 9, page 18 (after line 24), after subsection 29VA(2), insert:

(2A) An administration fee must not include any fee for personal advice (as defined by subsection 766B(3) of the Corporations Act 2001) except for personal advice solely in relation to a member's beneficial interest in the fund.

(9) Schedule 1, item 9, page 21 (line 10), omit "sections 29TB and", substitute "section".

(10) Schedule 1, item 12, page 25 (line 12) to page 26 (line 15), omit the item.

As was indicated by the Shadow Treasurer, my friend and colleague the member for North Sydney, the coalition has three batches of amendments encapsulated in those circulated in my name. The series of amendments that we are putting forward have been outlined by Mr Hockey in his speech during the second reading debate. The first of those relates to reporting responsibilities of large employer funds to APRA—and these are amendments (1), (2), (3), (4), (6), (7), (9) and (10) that have been circulated in my name. The bill as drafted would require a superannuation fund with a MySuper licence to apply to APRA prior to providing superannuation services to large employers. Five organisations—BT, Mercer, the Corporate Super Specialist Alliance, the Association of Superannuation Funds of Australia and the Financial Services Council—all argued strongly at the Parliamentary Joint Committee on Corporations and Financial Services hearing that this additional authorisation process for tailored MySuper products for large employers is unnecessary. This is because all funds offering such tailored plans are already authorised to provide a MySuper product.

The superannuation industry made the strong point that this additional process would be cumbersome, time consuming, unnecessary and costly. They also expressed strong concerns that this additional authorisation process would move APRA away from its proper and very important role as prudential regulator focused on risk and governance into areas of commercial interest between funds and large employers which have nothing to do with APRA's regulatory role. If this provision is not amended, fewer Australian workplaces will have super arrangements which reflect their employees' needs. Australians will have a reduced suite of products in a less competitive market, and further unnecessary cost and regulation will be introduced into the financial services industry. The coalition amendments will require superannuation funds to report the existence of these arrangements rather than apply to APRA prior to issuance. We believe one licence to operate a business in any industry is sufficient.

The amendments would still allow APRA to disallow a non-complying fund. Such a process would address the public policy concern that APRA must be able to track the existence and number of employer plans. It would achieve this without undermining the efficiency, competitiveness and commerciality of tender processes. The coalition amendment would also ensure that APRA continues to fulfil its proper role as the prudential regulator, which should be focused on risk and governance, without entangling it in commercial matters.

The second set of amendments, relating to the definition of 'large employer', comes under amendment (5) circulated in my name. There is significant industry concern about the benchmark above which large employers can tailor MySuper funds for their employees. The provisions of the bill allow for such tailoring where an employer contributes to a fund on behalf of 500 or more members. Many participants in the superannuation industry submitted to the parliamentary joint committee inquiry that the threshold in its current form is complex, unworkable and may have a number of unintended consequences. The organisations expressing these strong concerns included the Financial Services Council, the Corporate Super Specialist Alliance, Mercer and the Association of Superannuation Funds of Australia. This coalition amendment replaces the complex and unworkable threshold with a simple, easily quantifiable and effective test that defines the large employer threshold as an employer that has 500 or more employees at the relevant time.

The final area of amendments falls under amendment (8), relating to intrafund advice. Intrafund advice is the provision of financial advice by superannuation funds to their members. Currently, the term 'intrafund advice' and the advice provided by various superannuation funds can include very general advice, product-specific advice, advice on retirement options or even more specific or individualised 'holistic' financial advice. (Extension of time granted)

The committee inquiry into the bill received evidence from a number of participants expressing strong concerns about how intrafund advice would interact with the MySuper legislation, particularly given that it is only briefly referred to in the explanatory memorandum of the bill currently before the chamber. These concerns included a risk that such intrafund advice could lack transparency, could lead to some super fund members cross-subsidising others through the fees they pay, and also the risk of secret commissions.

At the committee hearings even Treasury appeared uncertain as to how intrafund advice would be treated under MySuper. The coalition considers that if intrafund advice is to continue to be provided in the future it should be provided under the same legislative and regulatory framework as all other financial advice. Despite intrafund advice clearly being a type of financial advice, there is no definition or scope of such advice provided in either the MySuper legislation or the government's Future of Financial Advice, FoFA, legislation. There is no limitation placed 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 complete lack of consideration, definition or restriction of intrafund advice within both the MySuper and the FoFA legislation is a serious omission on the part of the government that exposes consumers to severe risks. This is particularly the case because intrafund advice would not be subject to the best-interests duty being introduced by the FoFA legislation and because many industry super funds currently fund such intrafund advice by levying fees for this advice on all fund members. This would not be permitted if the FoFA legislation applied, as FoFA essentially bans the provision of advice in circumstances in which the cost of providing the advice is not met by a direct and transparent payment from the recipient of the advice. Given the reliance of many industry super funds on the provision of intrafund advice for marketing advantage and the attraction of new members, we are concerned that the government has avoided defining and limiting the scope of intrafund advice because it has bowed to the interests of the union dominated industry super funds.

The coalition members of the committee strongly recommended a number of changes. First, that intrafund advice should be defined in both the MySuper and the FoFA legislation; second, that there should be express limitations included in the legislation to ensure that such advice is general in nature only—similar to the provisions relating to basic banking products; third, that any financial advice accessed within a superannuation fund beyond such general advice should be expressly subject to the best interests duty and be paid for by the person accessing this advice without any cross-subsidy from other fund members. The coalition amendment achieves this by ensuring that any financial advice provided within the context of a MySuper product which is considered to be personal advice, as defined in the Corporations Act, cannot be bundled into the administrative fee of the MySuper product. The sole exception is, of course, where the advice relates specifically to the member's interest in the fund.

The coalition amendment ensures that MySuper members who do not seek to access such advice do not end up cross-subsidising those members who do access advice through their fees. It also gets rid of any secret commissions bundled into the advice fees charged as part of the administration fee. The amendment does not prohibit MySuper funds from providing advice; in fact, it actually assists them to do so by providing clear boundaries on what fees they can charge and who pays those fees. In the case of personal financial advice, it will be the person who accesses that advice, and not those members who do not use the advice, who will pay for the service.

I commend to the House the coalition amendments, and I hope that the parliament is persuaded by the strong logic that supports them.

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