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

I rise to speak on this bill that is now before the House and which seeks to implement the government's third tranche of legislation implementing MySuper, replacing existing default superannuation fund products. The bill contains eight schedules, all dealing with various reforms, to implement MySuper. I can state at the outset that the coalition has deep reservations in relation to schedule 6 of this bill, which deals with the transition to MySuper. We will seek to move amendments to excise this schedule from the bill. If this is not successful, we will seek to move an amendment to improve the schedule.

The coalition also takes a principled stance against the legislative changes contained in schedule 4 of this bill, regarding amendments to the Fair Work Act, so that only funds offering a MySuper product can be included in modern awards and enterprise agreements. The problem the coalition has with these changes is that not every MySuper product will be able to compete freely as a default superannuation fund under modern awards. The coalition has a fundamental objection to the closed-shop approach taken by the government. We will be moving amendments to address this issue. As I said, if we are unsuccessful in improving schedules 4 and 6, we will not support passage of the bill.

I will deal with schedule 1 first. This schedule seeks to ban conflicted remuneration payments from MySuper products. Schedule 1 contains changes which prohibit trustees from deducting any amount from MySuper products that relates to making a commission payment to a financial adviser. The changes contained within schedule 1 also implement restrictions on personal advice that superannuation trustees may charge for collectively.

In addition, schedule 1 prohibits financial advice provided to employers from being recovered through fees charged to members of the fund. The aim is to prevent commissions being charged to employees to cover the costs of an employer seeking financial advice. This schedule of the bill also contains changes to general fee rules which prohibit entry fees and limit exit switching and buy-sell fees for amounts over and above a cost recovery basis.

The parliamentary joint committee inquiry into the bill heard a range of evidence which highlighted concerns that the industry sector had in relation to schedule 1. The Association of Financial Advisers commented that intrafund advice would not serve the best interests of clients, as the advice could be provided without being based on a client's personal circumstances. The association also expressed concerns that the legislation was inconsistent when distinguishing between complex and basic advice.

The Law Council of Australia raised concerns regarding the potential conflict for trustees arising from the different grandfathering arrangements contained within this bill and the interaction these will have with the government's FoFA changes. The coalition has called on the government to withdraw this bill, to allow further consultation to remedy industry concerns, but the government has not heeded this warning and instead is choosing to pursue the change.

Schedule 2 of the bill that seeks to mandate that MySuper funds includes life and total and permanent disability insurance on an opt-out basis. The changes contained within this schedule also seek to align insurance definitions with conditions of release, to improve consistency with the purpose of the superannuation fund and to ensure payments flow through to members where an insurer pays out to the superannuation fund under the insurance policy. These changes will also prevent a situation where members are paying premiums on several types of insurance coverage but are unable to have payments released to them as they do not meet the superannuation fund's conditions of release. We view this as a sensible change. Schedule 2 also prohibits superannuation funds from self-insuring benefits of the fund, particularly life and total and permanent disability insurance. This ban will not extend to defined benefit funds. Such prohibition will seek to mitigate the risk of any shortfall in insurance benefits funded by other members' balances, which is pretty sensible, Madam Deputy Speaker. I hope you are paying attention.

Schedule 3 of this bill provides additional powers to the Australian Prudential Regulation Authority, APRA, in order to link further data from superannuation funds holding registrable superannuation entity licences. This will provide a large dataset over time and will ultimately provide policymakers with a more accurate picture of the superannuation sector. For example, it will provide more information on the structure of assets within the superannuation sector and more transparent information on expenses, such as fees being charged to policyholders. The changes contained within this schedule also require APRA to disclose quarterly information on MySuper fees, costs and returns.

The legislation further requires the publication on a website of a product dashboard that will show each MySuper and choice product's investment return target and—importantly—how often this has been achieved, the level of investment risk, a statement on liquidity of the product, and information regarding the average number of fees and other costs related to the product. The legislation also makes readily available a remuneration of superannuation funds' directors and executive officers as well as a breakdown of portfolio holdings. This information should already have been available to members of super funds and we remain sceptical as to whether these measures will actually achieve their aims, following the government's track record on the implementation of other websites. It always gives them a little bit of a shiver down their spines when I mention GroceryWatch and FuelWatch. In fact, the Parliamentary Joint Committee on Corporations and Financial Services heard a range of views from industry stakeholders who expressed concern about the workability of this schedule. We the coalition have called on the government to withdraw this schedule from the bill, to allow further consultation to be undertaken, and for the government to hear at least some of the concerns of industry.

The changes contained within schedule 4 of this bill amend the Fair Work Act so that only funds offering MySuper products can be included in modern awards and enterprise agreements. While every default fund has to be a MySuper product, not every MySuper product will be able to compete freely as a default superannuation fund under modern awards. The decision on the selection of default funds under modern awards remains with Fair Work Australia. This process is widely discredited to the point where the current government recognised this before the last election.

This government made a commitment to instruct the Productivity Commission to design a transparent evidence based and competitive process for the selection of default funds under modern awards. But we all know the difference between what the government says before an election and what it actually does after an election. It took this government until early this year to commission the Productivity Commission to commence the review. But before they handed it down Minister Shorten had already ruled it out. Get a load of that, Madam Deputy Speaker Rishworth. You, Madam Deputy Speaker, would be as appalled as I am at the fact that a minister commissioned a review and then ruled out its findings before the review was even handed down. You of all people, Madam Deputy Speaker, would be appalled at that, and rightly so—as I am.

But it is typical Labor, isn't it? It is typical of the government. That is what they do. They make it up as they go along. Of course, the minister is quite happy protecting his union mates given that he was the head of the Australian Workers Union. He has always given the union dominated super funds a leg up over alternative market based providers. Well, the coalition will seek to move an amendment to the schedule. If our first amendment to remove schedule 6 is unsuccessful, we will not support the bill.

The changes contained within schedule 5 seek to allow defined benefit fund schemes to continue to be used by employers for the contributions of employees who do not have a chosen fund. This is an exemption to the general requirement that employers must make contributions to a fund that offers a MySuper product for an employee who does not have a chosen fund. The changes also exclude defined benefit members from being counted in working out whether an employer is a large employer. This will mean that defined benefit employees are exempt from the 500-employee rule when employers are looking to be deemed a large employer.

Schedule 6 of this bill implements provisions that impose requirements for certain existing member balances to be moved into MySuper products, and it also contains a whole new raft of transitional rules. As I stated at the outset, we have deep reservations in relation to this schedule of the bill. We will be seeking to move an amendment to excise the schedule from the bill. Again, if we are unsuccessful, the coalition will then move an amendment that seeks to improve this schedule, along with schedule 4. It aims to restore competition and choice to super.

Schedule 6 amends the SI(S) Act to introduce a new concept of an accrued default amount. The new concept defines those parts of a member's interest within an existing superannuation fund which in turn must be moved into a MySuper product. These are amounts whereby a member has not exercised an investment choice or amounts held in a default investment option of a fund. This broad definition will mean that fund members who have chosen a specific super fund as well as fund members who have their superannuation invested in the default investment option of that specific superannuation fund will have their balances transferred to a MySuper product unless they choose to opt out. So funds have until 1 July 2017 to transfer all accrued default amounts to a MySuper product unless the member opts out in writing. This will significantly expand the amount that is being transitioned into MySuper, with significant financial consequences for individual fund members, including those who have previously exercised their right to actively choose their own super fund. This will mean that, under the proposed accrued default amount definition contained within this schedule, all existing default fund workplace accounts, as well as the balances of individuals who have previously exercised choice of funds but who have remained with the default investment option of their chosen fund, will be swept up into the new default MySuper product. Given that this transfer will take place on an opt-out basis, a member who does not choose to opt out will have their superannuation account balance transferred out of its current investment option or fund into a MySuper product chosen by someone else.

The proposal to transfer such a wide range of accounts into MySuper gives rise to a number of consumer protection issues. Many members who have exercised choice will be inappropriately swept up and are likely to find that, post transition, they are now invested in an investment option which they do not want. Such members will also have incurred transaction costs from the selling and rebuying of assets as a result of the transfer, unnecessarily crystallising capital gains.

This also has potential implications for insurance within super, as the MySuper death and total and permanent disability insurance cover is likely to be less than is currently enjoyed by a member of a chosen default fund. Some people who have not been covered within their chosen fund for a long time may not be able to qualify for life insurance or may only qualify on inferior terms given the changes in their personal circumstances since the original cover was taken out.

We will move amendments to excise this schedule from the bill. If this amendment is unsuccessful, we will move another amendment to ensure that a member who has chosen a super fund does not have an accrued default amount and is not moved to a MySuper product. This amendment follows generally the recommendation of the submission by the Law Council of Australia on the exposure draft and is strongly supported by the Financial Services Council, AMP and commercial super funds. As I have stated previously, if our second amendment is also unsuccessful, we will not be supporting this bill.

The final schedule of the bill relates to eligible rollover funds. ERFs have the sole purpose of being a temporary repository for the interest of members who have lost their super accounts. ERFs keep and preserve these balances until the member has been found. Schedule 7 amends the SI(S) Act so that trustees are required to apply to APRA in order to obtain authorisation to operate an ERF. All balances in an existing ERF will be required to be transferred into an authorised ERF or a fund that offers a MySuper product within 90 days where an application for authorisation has not been made or if APRA has refused authorisation.

I look at this bill and I say, 'Bring on the red tape.' That is what it is—just more red tape, more process—and all with a political purpose from the minister of trying to support some of his mates in the industry. So we will be moving an amendment to excise schedule 6 from the bill. If we are unsuccessful, we will move additional amendments to schedules 4 and 6.

In concluding, I would like to draw the House's attention to the government's failure to have an adequate regulatory impact statement on this legislation. The regulatory impact statement on the second tranche of the MySuper legislation was carried out in September 2011, long before the final version of the legislation was available. Further, a number of matters in various tranches of the legislation were exempted from the regulatory impact statement. The Office of Best Practice Regulation noted:

The Prime Minister granted exemptions from the requirements for regulatory impact analysis in relation to the ability of funds to offer tailored MySuper products to employees with more than 500 employees, and extension to the date by which trustees will be required to have transferred the balance—

and so on.

So the Prime Minister granted an exemption from any regulatory checks on this legislation. It is typical, really, isn't it? As my colleague the shadow minister for finance says, it is just a disgrace. The burden that you are placing on business, and small business in particular, is just enormous. So yet again we have a failure of good governance. These concerns that we have were echoed vigorously by the industry, and why not? There is no transparency. There is no up-to-date regulatory impact statement. There is policy on the run. There are amendments on the run.

The bill was referred to the Parliamentary Joint Committee on Corporations and Financial Services, but government members forced the committee to undertake a rushed inquiry with only a few hours of hearings. In fact, the original intent of government members was to have no hearing at all, to have an inquiry with no submissions. That is the way Labor operate. They have inquiries with no submissions and they have policy outcomes that fail. But we should not be surprised, because they introduce taxes that hardly raise a dollar but, gee, they know how to waste money.

They also know how to introduce regulation. Labor said it was going to be their commitment to abolish regulation when they were first elected in 2007. My numbers are pretty close, and from what I understand Labor have done a sterling job reducing regulation. They have abolished around 80 regulations since they were elected. The problem is they have introduced 20,000 more, and here you have another whole raft of new regulations. Labor must be so proud of themselves. Labor members must be doing cartwheels at the red tape they are inflicting on small business, on families, on large business. They are wrapping up the entire community like a Christmas parcel with all the red tape that is rolling around. Even Santa would blush at the amount of red tape that has been used in regulations here in Australia just in the last five years. Wouldn't he envy that when he is wrapping his Christmas presents for all those kiddies out there?

It was only after the coalition stood up that a short inquiry was held, and of course the government dominated committee backed its minister. What a surprise! Therefore, we will proceed with our amendments. As I said, if our amendments are unsuccessful, we will not be a party to this bill and we will oppose the bill in full.

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