Andrew Wallace (Fisher, Liberal Party) Share this | Hansard source

I rise in support of the Treasury Laws Amendment (Your Future, Your Super) Bill 2021. Australia, like most developed countries around the world, has an ageing population. It's never, ever been more important than it is today to ensure that we have a system which will adequately support Australians in their retirement in the decades to come. The good news is that, on the Melbourne Mercer Global Pension Index, Australia is ranked as having the third-best retirement system in the world. As it stands, the system is pretty good, but it could always be better. The world has changed in the past 30 years—I don't need to tell you that, Mr Deputy Speaker. Today, the average Australian employee changes jobs 12 times throughout their career. In fact, a couple of weeks ago I was telling the chamber about my dear old dad, who became an apprentice mechanic at the age of 14 and he's still a mechanic at the age of 87. In his day, when you went into a line of work, there you stayed. But today we anticipate that employees will change their job 12 times over the course of their working lives.

With each job change comes the need to designate a super fund for the new employer to be able to contribute to that fund. Indeed, thanks to the reforms of this government, more Australians than ever before are able to exercise that choice. Unfortunately, all too many do not nominate their existing fund when changing employers. There are as many as 10 million unnecessary duplicate accounts, making up a third of the entire superannuation system in this country. Every additional account introduces another set of fees, which can be as high as two per cent, costing hundreds of dollars a year at a minimum. Just as damaging, the default funds provided by many employers are far from the highest performing and workers' hard earned money, which ends up in these lower-performing default funds, is not delivering the returns that Australians deserve. This bill will go a long way to solving this challenge and delivering billions in additional super savings to Australians over the decades to come.

Schedule 1 of the bill provides that, where a new employee does not nominate a super fund, the employer will be required to contact the ATO to ascertain what the employee's existing fund is. Those on the other side of the House might call that red tape. We call it sensible regulation, and I'll tell you why. The new employers will then have to make their contributions to the fund that the ATO advise them about. This will prevent millions of Australian employees from accidentally racking up multiple new accounts and it will save each of them hundreds of dollars a year in fees. This is sensible reform, but unfortunately not all super funds are equal—you know that, I know that.

In 2020 the best-performing funds, including UniSuper and AustralianSuper, delivered five-year returns of between seven per cent and nine per cent. The worst-performing funds, like AMP and Zurich, delivered returns of between zero and two per cent. In fact, investors in AMP's Capital Dynamic Markets balanced fund actually lost money. At the end of their career an Australian worker in the worst-performing funds will be hundreds of thousands of dollars worse off in retirement than the same worker in the highest-performing fund, despite saving exactly the same money.

We need healthy competition among super funds to drive down fees and to incentivise maximum return on investment. This is not rocket science. However, at present, unfortunately many Australians end up simply accepting the default fund of their first employer and they never change it. Currently, there are as many as three million accounts in these under-performing funds, totalling as much as $100 billion of Australians' savings. We must do more to ensure that Australians have every opportunity to escape poorly-performing funds and that fewer ever enter funds that are consistently letting down members.

This bill achieves both of these ends by mandating that APRA will conduct an annual performance test of superannuation products to set an objective benchmark for what constitutes an unacceptably poor return for a fund. Funds that fail to perform against this objective benchmark will be required to formally notify the workers whose funds they manage that the fund has done so, and they will have to do that within 28 days. This will ensure that workers will not be able so easily to miss the understanding that they could be going better and getting a better bang for their buck elsewhere. It will no doubt inspire many to overcome what is a problem of inertia and look into the possibility of switching to a better-performing fund.

To further protect new customers from unknowingly defaulting into a severely underperforming fund, the bill provides that funds which fail to meet the objective performance standard laid out by APRA two years in a row will be prohibited from accepting new members into the scheme until their management and performance have improved. In short, this bill will ensure that super funds can no longer rely on the inertia and low involvement of their beneficiaries to prop them up when they are consistently letting Australians down. In total, its provisions will leave Australians $14 billion better off over the next 10 years.

Finally, schedule 3 of the bill will clarify trustees' obligations and make sure that they are doing the right thing. Despite the noise created by members opposite, the bill will, in truth, simply ensure that trustees have an obligation to act specifically in the financial interests of members rather than any other interests—what we call fiduciary obligations. As recommended by the Productivity Commission, it tightens up record keeping and transparency obligations and ensures that APRA can make additional regulations where it's necessary to hold trusties to account. While we're improving the financial performance of super funds and ensuring that workers have more and better choices, schedule 3 of this bill will help stamp out some of the poor management practices uncovered by the financial services royal commission.

The implications of this bill could not be more wideranging. Almost all of us have a superannuation account. The super pool of $3 trillion is by far and away the greatest investor in this country. In fact, it is one of the greatest systems and most capitalised systems in the world. That is pretty good for a country of 25 million people. More effectively run super funds making better investments means more efficient use of the capital available to us and it means a better-functioning economy. More effective super funds investment means stronger economic growth and it means more jobs today. It means a more comfortable retirement for Australians in the decades to come. These reforms, while subtle, are a critical part of building the Australia that we want to see as we recover from this COVID-19 pandemic. I commend the bill to the House.

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