Shayne Neumann (Blair, Australian Labor Party) Share this | Link to this | Hansard source

I speak in support of the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011. With about $1.36 trillion held in superannuation funds across the country and with about 8.1 million of the 11 million Australians in the workforce having significant superannuation, dealing with superannuation is absolutely critical to the financial prosperity and economic development of our country. It is about dignity and security and financial provision for people in their retirement years.

Jeremy Cooper, in his review commissioned by this government—and I pay tribute to former Senator Nick Sherry and Minister Chris Bowen, who, in a different guise, was the minister responsible for this area—said that by 2035 we would have, based on Treasury figures, $3.2 trillion in superannuation investments in the country. Deloittes say it is about $6 trillion. Whatever figure it is, it is an enormous amount of money, so dealing with this sort of superannuation is crucial.

One of the things that came out through the Cooper review, which issued many issues papers and interim reports during a period of about five months, was that Australians currently pay in fees around $85 on average a month, which is significant. As Minister Shorten said in his second reading speech, it is in fact more than the average person's monthly mobile phone bill. Anything that can add more money into the pockets of Australians and less in fees to superannuation companies is a good thing for giving people more money when they decide to either transition to retirement or, indeed, retire fully. A dollar that they have is a dollar the superannuation companies do not have. It gives them more ability to go on that long, well-earned trip. to buy that new car, to make sure they can meet their grocery prices and household expenses for themselves, to take a night out and go to the movies or have that dinner together.

The Cooper review had a plethora of recommendations; 177 recommendations were made to the government, and the government in whole or in part accepted 139 of them. Those recommendations were wide ranging. One of the elements of the recommendations was the creation of a MySuper product which would be a new default superannuation product having few or no fees or charges and which was much cheaper than the default superannuation schemes that were operating. The government accepted those recommendations, but they required the Australian Prudential Regulation Authority to be satisfied that the MySuper product had the necessary features to make sure that it would be achieving what I will call the 'Cooper outcome' of making sure that people had a confidence in that system, that there was a diversified investment strategy, that the whole process of good returns to members was enhanced and that there were fewer fees and charges and a reduction in the kinds of expenses that were given to people. So the idea of some basic features in this MySuper product was a worthy goal and a Cooper recommendation. It was a more simplified and low-cost superannuation product that would enhance the financial security of people in their retirement. As I say, there had to be authorisation by APRA in terms of those particular superannuation funds.

The bill proposes specifically to offer the MySuper product from 1 July 2013 and make it compulsory for employers to make contributions to superannuation funds that offer that product from 1 October to meet the obligations that they have as employers in relation to the superannuation guarantee. I might add that this particular aspect of our reforms adds to the many reforms that we have undertaken in relation to superannuation which have seen and will see a benefit to my constituents in Blair in South-East Queensland—specifically, the increase of the superannuation guarantee from nine to 12 per cent, phasing in from 1 July 2013 to 1 July 2019, will in fact benefit 43,000 people in my electorate. The assistance that we have given in terms of low-income superannuation contributions is helping 3.6 million low- and middle-income Australians. They currently pay $500 a year in tax on their superannuation and will pay nothing. It will benefit 23,600 workers in my electorate.

I was pleased that the minister listened to the entreaties of both me and a number of other people in relation to the superannuation guarantee. As I had experienced when I was talking to the Ipswich Association of Independent Retirees recently in Limestone Park, they raised with me these types of issues. One of the things I pointed out to them was the 51,000 workers 70 years in age and older who will benefit from what we have done to boost superannuation retirement earnings for them by making sure that we are for the first time allowing them to also enjoy the benefit of superannuation guarantee. Their employers will make a compulsory contribution if they continue in paid work—and many do as they transition into retirement. So that, along with the clearinghouse that we are undertaking to support, is important as part of what we have called SuperStream superannuation reforms. I think that clearinghouse will also improve the capacity and ability not just to collect data but also for people to get access to information to make decisions about superannuation. That is designed to make sure superannuation payments are processed more expeditiously and will reduce administration costs as well. That is an important reform as well.

The legislation here before the chamber also deals with other aspects which I think are important. One aspect is for those few rogue employers who may fail to pay the MySuper product when that has been the choice of those consumers of the superannuation service—those employees in their employ. If those employers fail to meet their superannuation obligations on the MySuper product, they themselves will be found liable for the superannuation guarantee shortfall. The bill requires, of course, the employer to pay that money into that product.

The bill permits trustees to be authorised for one MySuper product per fund unless they qualify for one of two exceptions to be able to offer more than one product. First, the trustee will be able to tailor the MySuper product to large employers who have funds of in excess of 500 employees. Funds will be able to offer a variety of different MySuper products in those circumstances to preserve existing corporate brands as well. They are the exceptions. The trustees may wish to offer more than one product. They are required to be authorised by APRA in relation to the MySuper products offered.

These are important contributions to the whole superannuation reform agenda of this government. I have seen the benefit of those reforms in my electorate. When I speak to people at the many mobile offices, street stalls, country shows and community groups, including the one I recently referred to, there has been support for what the government is undertaking. I think it is done in a way that stakeholders in the industry have been consulted through the review process, people have been given choice, expenses associated with administration have been reduced and there is a focus on making sure that people have more money in their super schemes for retirement.

In the circumstances this particular legislation is the fulfilment of yet another federal Labor government commitment that we undertook at the last election. When I did some investigation in relation to this matter I noted that the coalition's view in relation to the MySuper product was one of wait and see. They made no commitment in relation to the Cooper review before the last federal election. I will be pleased to see their commitment to supporting this particular legislation. It is sensible reform in the circumstances and it will enable people to live with greater certainty and dignity in their retirement. I commend the legislation to the House.

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

I am very pleased to rise to speak on the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011. This is a bill which follows the Cooper review into Australia's superannuation system. In essence, what it purports to do is create a new and supposedly cost-effective superannuation product to replace existing default products. Specifically, the bill defines what a MySuper product is, sets out rules as to the payment of contributions and account transfers for MySuper products, and sets out the fees that can be charged and the basis on which those fees can be charged to members of a MySuper product.

Importantly—and this is really the core of what the bill does—it provides that from October 2013 employers must make the default superannuation contribution for an employee, with the exception of employees who have specifically made a fund choice which is a minority of them. All other employees must have the benefit of a payment by their employer into a fund that offers a MySuper product. This is of great importance because the vast majority of employees have not exercised a conscious choice as to which fund they want their superannuation contribution to go into. As a consequence, this legislation will have the effect that, in respect of all of those employees, employers will be under an obligation to make the payment into a MySuper product.

The coalition supports reforms which make Australia's superannuation system more efficient, more transparent and competitive and which deliver improved value for superannuation fund members. This then comes to the question: do the reforms contained in this bill achieve that objective—the objective of making the system more efficient, transparent and competitive and of delivering improved value for members of superannuation funds? The answer is that in some respects this bill does advance the position towards achieving that objective but in other material respects it does not.

Let me expand upon that by making comments in three areas in the brief time that is available to me today. Firstly, I want to highlight that there are significant implementation issues when it comes to this piece of legislation. Secondly, I want to point to an important defect in the legislation, which is that it fails to open up default superannuation funds to competition. On the contrary, what it does is entrench the anti-competitive framework of the modern award system. Thirdly, I want to highlight the failure of the bill to achieve the desired state of competitive neutrality when it comes to the treatment of so-called intrafund advice.

Let me turn to the first point, which is the question of implementation. I take no pleasure in saying to the House that every bill that the minister chooses to deal with seems to be characterised by similar patterns. Every bill that this minister brings to the House seems to be rushed, seems to be disorganised, seems to be poorly thought through in important respects and seems to be motivated more by the desire to get a headline than to deliver substantive reform.

I will concede that the original version of this bill was even worse than the one which the House is now considering. In the original version of the reforms proposed there was going to be a mandate that only one particular fee level could be charged. Well-known superannuation consultants Chant West found that this model would have resulted in 750,000 Australians being forced to pay higher fees than they are currently paying given the fact that there is already a wide availability of low-fee, no-frills products across the superannuation sector. The coalition is certainly pleased that the government has decided to back down on the one-fee approach and will allow MySuper funds to offer differentiated fee structures.

That being said, there remain significant implementation concerns about this bill and particularly the fact that the process has been extremely rushed. According to the Financial Services Council, there is a risk of employer and member disruption with the proposed three-month period from 1 July 2013 to 1 October 2013 when superannuation guarantee contributions may continue to be paid into existing default funds prior to compulsory MySuper contributions commencing. The Financial Services Council therefore calls for extending the compliance transition period for employers through until 1 July 2014 and also a limited extension beyond 1 October 2013 for funds which have lodged an application prior to 1 July 2013.

Let us also look at what respected superannuation industry participants Mercer have said. Mercer support a deferral of the implementation of MySuper from 1 October 2013 on a number of grounds, including the implications of the package and its implementation for trustees, employers and employees, and superannuation fund members, and they have this to say:

It is becoming increasingly clear the date of 1 October 2013 specified in the Bill as the date by which all default contributions must be made to a MySuper product is unlikely to be achievable. The October 2013 date leaves insufficient time for trustees to:

It is interesting that the Association of Superannuation Funds of Australia supports a delay in employer compliance from 1 October 2013 to 1 July 2014 in order to mitigate the risks involved in making the changes proposed by the Stronger Super package.

I need hardly remind the House that an additional factor which makes the implementation of this detailed and complex package even more complex is the fact that it is going through at the same time as the minister has introduced and is requiring the implementation of the Further Future of Financial Advice Measures. Many financial institutions will be affected by the need to make major changes for these two separate packages, and the implementation complexities are very substantial and certainly not assisted by the rushed and chaotic nature of the process by which we have got to this point.

Let me turn to the next point I would like to highlight, which is the fact that the regime to be introduced in this bill exacerbates the already seriously anticompetitive nature of the current modern awards system as it applies to competition in the superannuation sector. I mentioned that a core requirement of this bill is that, for the vast majority of employees who have not made a conscious choice of fund, the only option available to their employer is to pay their contribution into a MySuper product. Yet, curiously, the government has failed to take this opportunity to expand the range of choices which employers have as to which default superannuation fund they can make the contribution into.

You would be aware, Mr Deputy Speaker Scott, that under Labor's so-called 'Fair Work' Act, so-called 'modern awards' are required to contain a clause specifying the superannuation fund into which the employer must pay the employee's super contributions if the employee has not specifically nominated a fund and, as is well known, the vast majority of employees have not chosen to exercise a conscious choice. The process by which Fair Work Australia determines which funds are nominated in modern awards is a secretive, non-transparent and non-competitive process. Yet, to be nominated as a default fund in a modern award is a valuable privilege for those funds which are so nominated because they receive a steady stream of contributions.

It is no coincidence that these arrangements work very much to the advantage of industry funds and public sector funds, and it is those funds which are closely aligned with the union movement. It is those funds in which often up to half of their directors—and in the case of some public sector funds, potentially even more—are union officials.

An analysis conducted by the Institute of Public Affairs recently found that, across 166 modern awards approved by Fair Work Australia, there were a total of 566 funds specified as default funds under those awards and, of those, 513—the vast majority—were industry or public sector funds. To mention just one fund, Australian Super is the largest fund and the one which the minister for superannuation was in a previous life a director of. Australian Super is specified as a default fund in over 70 modern awards. This is an issue which industry participants in the superannuation sector have constantly highlighted as constraining competitive neutrality and, therefore, not being in the best interest of fund members. It is not in the best interest of those Australians—that is to say, all of us—who are using the superannuation system to save for our retirement.

The introduction of the MySuper arrangements is a missed opportunity to correct this gravely anticompetitive set of arrangements. It would be an obvious and natural thing to do if you are specifying that there is a particular kind of product, a MySuper product, which must be offered by all funds and into which contributions must be paid unless the employee has deliberately exercised a specific choice to the contrary. It would be an obvious and natural thing to do and to say, and therefore what follows from that is that any MySuper product of any superannuation fund is suitable as a product into which an employee's contributions can be paid by their employer. However, the government for its own reasons has chosen not to take that obvious and natural step, a step which would have significantly increased competition and which would have reversed the unsatisfactory nature of the inherent advantages which this government has chosen to use in the superannuation system to provide to certain classes of superannuation funds.

The minister is a former director of a predecessor organisation of the largest industry superannuation fund, Australian Super. Interestingly, other former directors of that fund now in the parliamentary Labor Party include the Minister for Climate Change and Energy Efficiency, Mr Combet, and Senator Doug Cameron, as well as the failed Labor candidate for the seat of Melbourne in the 2010 election, Cath Bowtell. In other words, there are very close and cosy links between the parliamentary Labor Party and industry superannuation funds. It is hard to avoid the suspicion that the failure to make this natural and obvious change to permit any MySuper product of any fund to be the recipient of the contributions of employees is motivated by the same desire to advantage certain sectors of the superannuation industry over others, as has motivated many other policy measures introduced by this minister and this government.

The last issue to briefly highlight is a failure of competitive neutrality in the way that intrafunded advice is treated. In essence, the arrangements in this bill suit the business model of one class of fund—that is, industry superannuation funds. They do not sit well with the business model of other classes of funds and they do not appear to be consistent with the principle which underpins the future of financial advice reforms. Aspects of this package contained desirable reform; other aspects of this passage raise serious concerns, as is so often the case with measures introduced by this government.

Geoff Lyons (Bass, Australian Labor Party) Share this | Link to this | Hansard source

The member for Bradfield obviously conforms to the Liberal policy of make sure you keep the capital away from the workers. That amazes me. I rise to speak today on the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011. During the 2010 election the Gillard Labor government announced that it would assist families to save for their retirement by introducing a new low-cost simple superannuation product called MySuper. MySuper is a signature reform from the Cooper review into superannuation. The focus of the reform is lowering fees and improving efficiency and superannuation so the savings of members are maximised. This reform delivers on an election commitment to introduce a new low-cost default superannuation product, MySuper, by 1 July 2013.

The review chair, Jeremy Cooper, said MySuper would be a simple, cost-effective product that redefines what Australians should be able to expect from their super in the 21st century. I am pleased speak on this legislation today as MySuper complements the government's policies to increase superannuation from nine to 12 per cent, and it passed the Senate in March this year. It is a huge win for Australians. I am proud to say that 8.4 million Australian workers will benefit from this change. It is in the national interest to encourage Australians to save more for their retirement, but it is also fair. The superannuation industry contributes to higher retirement savings through greater efficiency and lower fees. These are solid reforms.

The proposed bill implements the core elements of MySuper and the government's 2010 election commitment to introduce a simple, cost-effective superannuation product that will replace existing default superannuation products. This bill will enable authorised Australian Prudential Regulation Authority regulated superannuation funds to offer MySuper products from 1 July 2013 and will make it mandatory for employers to make contributions to super funds that offer MySuper products from 1 October 2013 in order to meet their superannuation guarantee. Essentially, the bill sets out the requirements for authorisation of MySuper products, through APRA, that must be met by trustees of superannuation funds that wish to offer MySuper products, as well as the key characteristics of MySuper products and the permitted fees and associated fee-changing rules for MySuper products. MySuper products will be simple, cost-effective default superannuation products that will replace existing products.

Authorised superannuation funds will be able to offer MySuper products to members from 1 July 2013 and I hope that workers in my electorate of Bass take up that offer. Trustees will be required to apply for APRA authorisation for each MySuper product they wish to offer. The large employer exemption will allow funds to offer a tailored MySuper product to employers who contribute to that fund for the benefit of at least 500 employees and associates to suit the needs of the particular workplace. However, some employers will be able to negotiate a discounted administration fee for their employees in a generic MySuper product. This will allow trustees to provide more flexibility to certain employers and will result in some members not being forced to pay higher fees as result of the introduction of MySuper.

We, the Gillard Labor government, want to do all we can to ensure that Australians have enough money in their retirement. We are leading healthier, longer lives and many Australians currently do not have enough saved in retirement kitty for their nonworking years. The superannuation industry manages $1.3 trillion in hardworking Australians' retirement nest eggs. Every dollar diverted in fees or other unnecessary overheads is a dollar less towards a larger nest egg for a more secure retirement. Over a person's working life these fees can total tens of thousands of dollars in lost retirement income.

The MySuper reforms are part of the Gillard Labor government's plan for a stronger economy and are the next phase in Labor's reforms to a national superannuation system. The standards that MySuper products will have to meet include no entry fees, with exit fees limited to cost recovery, and a ban on hidden fees and commissions in relation to retail product distribution and advice by financial advisers. There will also be standardised reporting requirements in plain English so that ordinary Australians will understand what is going on with their super. This is very important and will be welcome news to everyday working Australians. MySuper accounts will have the ability to accept all types of superannuation contributions. There will also be new standards around the payment of performance fees to fund managers.

Our superannuation changes build on a series of reforms the Gillard Labor government have already made to assist Australians plan for a safe and secure retirement. We have delivered reforms to provide more support for pensioners by increasing the age pension. A key example of this was in September 2009 when Labor delivered the biggest increase in the pension in 100 years and reformed the pension system so that it kept up with the cost of living. Since 2009 the maximum pension rate has increased by $154 a fortnight for singles and $156 a fortnight for couples. The government have also: delivered a new seniors work bonus so that local pensioners can keep more of their pension when working; increased the utilities allowance by about $400 a year to help pensioners keep on top of the bills; and delivered a new national transport concession scheme so that pensioners can access cheaper public transport when travelling interstate. And over the course of the last six weeks Labor have also delivered another pension boost, under the clean energy package, with another boost to occur in mid-March 2013.

Our historic reform with the minerals resource rent tax provides a significant boost to the superannuation guarantee from nine to 12 per cent over the next decade. This will increase the retirement savings balance for an average worker aged 30 today by $108,000. We are also providing new concessions for low-income earners and bigger contribution caps for older Australians with low super balances looking to make catch-up contributions. We are working hard to ensure that Australians have enough superannuation for retirement.

Together, these reforms will increase Australia's pool of superannuation by $85 billion over 10 years. This is a significant achievement. We are improving the lives of Australians now and into the future.

There has been a great deal of support for the MySuper product. Glenda Korporaal, from the Australian newspaper—not a journal that has taken to supporting Labor that often—reported on 6 July 2010:

The MySuper proposal, which is one of the basic recommendations of the report, should not be seen as controversial.

She went on to say:

MySuper is about having a standardised, low-frills, no-fee superannuation product available to every Australian worker as a basic option for their retirement plan.

Yet those in opposition and some super funds have been scaremongering. The consumers lobby Choice has said that more low-fee options were essentially good for workers. Yet the Leader of the Opposition, the member for Warringah, is mindlessly negative and opposes everything but has no real plan for building retirement incomes for workers. He acts out of political interest, not the national interest. More and more I notice in parliament the difference between those opposite, who stand for the privileged at the expense of workers, and Labor, who stand for the vulnerable. We know the Leader of the Opposition has extreme views on compulsory superannuation. He once described it as the 'biggest con job ever' and in the Battlelineshis book, for those who do not know—he outlined a plan to dismantle it and increase the age pension age to 70. There is no support for the vulnerable there. On all the big economic calls, like putting more money into the pockets of retirees, the Liberals get it wrong.

The Gillard Labor government are working hard to build a strong economy, a sustainable environment and a fair society that provides every Australian with the opportunity to prosper and succeed in life. Our first priority is keeping the economy strong, protecting jobs, driving new growth and creating opportunity for all so that no person is left behind. Labor are on the side of working people. That is why we are doing everything we can to look after families, especially at times in their lives when they need help. That is why Labor are raising superannuation from nine to 12 per cent for a more dignified retirement.

The world and the economy is changing. Australia faces many challenges and big opportunities in the years ahead: an ageing population, increased global competition, environmental degradation, keeping the economy strong beyond the mining boom, a future for manufacturing, and rapidly developing new technologies. If we do not face up to this changing world, if we put our heads in the sand, it will not be the well-off who get left behind; it will be the ordinary, vulnerable Australians who will miss out—ordinary Australians like the working families in my electorate of Bass. These superannuation changes are the right step forward to address the challenge of the ageing population. Improving living standards for this and future generations of Australians means making the right decisions now. We are doing well, assisted by the mining boom and reforms of the past, but it will not last forever. You can dig something up only once, so we need to make sure that the benefits of the boom are fairly shared. We are determined to get the big things done and do what is right, putting the national interest first even when this is not the easy thing to do. Many Australians are concerned that they will be left behind by the boom and that some parts of the country are getting ahead while others struggle with rising prices and a lack of opportunity. There is a high demand for our mining resources, being driven by the strength and growth of Asian economies, along with our strong economic fundamentals, that is pushing the Australian dollar. That is why some people—families—can buy cheaper goods and cheaper petrol, but it also puts a lot of pressure on industries like manufacturing. Change presents opportunity. The global economy is changing, technology is changing and the climate is changing. We can and should grasp the job opportunities that they create. I believe no challenge is beyond Australians, and I believe the Gillard Labor government are up to the challenges right now and we can seize them and turn them into opportunities.

Because of actions that the Labor government took in the global financial crisis, we saved jobs and avoided recession. The fact is that the Australian economy is strong, with low unemployment, low debt and a strong budget. To meet the challenges of the future, Labor is pursuing policies Australia needs for the future: putting a price on carbon emissions for big polluters, building the NBN, sharing the benefits of the mining boom and increasing retirement savings through superannuation. Australians should rightly be proud of our nation's economy. We are making significant changes to super. This is an exciting time as Labor looks after the vulnerable and boosts the savings of ordinary Australians. I commend the bill to the House. (Time expired)

Bert Van Manen (Forde, Liberal Party) Share this | Link to this | Hansard source

For a minute there I thought we were talking about Labor's attempt at economic brilliance, but we are actually talking about superannuation. We have listened to 10 minutes of an attempt to sell Labor's economic message but there is not much there to sell. You talked about the three per cent increase in super—

Mr Lyons interjecting—

You are not paying for it; the employers are paying for it. With the effect of your economic policies on business and the economy in general, I wonder whether the supposed $108,000 increase in retirement benefits in 30 years time will actually eventuate, because there is certainly no guarantee with this government in power.

To return to the substance of the bill we are talking about today, the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011, the superannuation fund industry has grown rapidly over the past few years and will continue to grow into the future by virtue of the sheer volume of funds being paid into it, even at the present levels of nine per cent. Superannuation was once thought of as a perk for the white-collar workers in large firms or in the Public Service. However, these days its benefits cover around 90 per cent of our working population. According to APRA's Annual Superannuation Bulletin issued in February this year, total superannuation assets increased by about 11.5 per cent during the year to 30 June 2011 to $1.3 trillion. Of this total, $810 billion are held in APRA regulated super entities and another $407 billion are held by self-managed super funds which are regulated by the ATO. The remaining $117 billion comprises exempt public sector super schemes and the balance of life office statutory funds.

Public sector fund assets increased by some 22 per cent during the year to June 2011 and the small funds, which include SMSFs, single-member approved deposit funds and small APRA funds increased by 11.5 per cent, industry funds by 11 per cent, retail funds by nine per cent and corporate funds by nearly four per cent. So we can see there are a wide range of providers of superannuation products in the marketplace that have a variety of members and are growing at different rates. The one thing that is common is that they are all growing in terms of funds under administration. So it is certainly moving from strength to strength.

Members of small funds held the largest average account balance of some $485,000 at June 2011, whilst corporate fund members held average account balances of somewhere around $98,000 and public sector funds, some $62,000. Industry fund members had an average of only $24,500. So there is quite a significant disparity in the average fund balances between various sectors in the superannuation industry. There are 27 million accounts for 10 million super fund members—that is, an average of two to three accounts per member. In my professional life before entering this place, I worked on one occasion to assist a client who had eight superannuation funds, but having clients with three to four funds was not uncommon.

This bill will introduce the new low-cost superannuation product known as MySuper, which will replace existing default superannuation fund products as outlined in the Super System Review 2011. The coalition has been consistent in supporting changes to superannuation in an effort to make the superannuation system more efficient, more transparent and competitive, with the ultimate objective being to improve the value for super fund members. With this primary objective in mind, we were concerned about the initial MySuper proposal that included an imposition of uniform pricing through legislation, as this would have created unnecessary inefficiencies and left many consumers worse off. At the end of the day, we need to ensure that the many changes made to existing laws benefit consumers—super funds members, in this case. The best way to maximise value for all members across all parts of the superannuation value proposition—that is, fees, fund performance and service—is to maximise the competitive tensions in an appropriately transparent system. Research by Chant West found that under a one-fee government mandated model some 750,000 Australians would have been forced to pay higher fees than they are currently paying. Chant West also points out that, with a small reduction in fund performance on the back of lower performance or lower risk, MySuper funds would very quickly wipe out any gain from lower fees.

Over the past 12 months there has been quite a debate going on in relation to these issues, and the government has thankfully now backed down from its original proposal to impose a uniform fee structure as part of the MySuper proposal. It is therefore now our understanding that the government will allow MySuper funds to offer differentiated fee structures. I would like to point out that low-fee, no-frills super products have been available to consumers for some time now through both retail and industry superannuation funds. Therefore, in some respects, the creation of a MySuper product through legislation is thought of as an unnecessary interference with those existing products. However, what is proposed now is certainly an improvement on where we were a year ago.

There are, however, still some significant issues that the bill in its current form fails to address. These include a lack of transparency and competitiveness with default funds, in particular, industry funds. The definition on intrafund advice has not been adequately detailed or disclosed. The threshold for large employers is complex, unworkable and may have a number of unintended consequences, and the industry has pointed out that the reporting of large employer funds to APRA will be cumbersome, time consuming, unnecessary and costly.

This bill mandates that from 1 October 2013 only MySuper products can be used by employers to make default superannuation contributions for employees who have not chosen a fund. However, the government has failed to disclose who these funds will be. The decision on which funds were selected as default funds remains the prerogative of Fair Work Australia through a secretive, non-transparent and non-competitive process, a process that works against our objective of being able to improve the value for super fund members. The current process, which focuses heavily on the industry super funds, does not provide the transparency and competitiveness needed to achieve improved value for super fund members.

Back 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 selection of default funds under modern awards. As with many things, this is yet another broken promise from this Labor government. The closest we have come to this promise is another promise that the minister responsible for this bill will act on it in 2012. I have a newsflash for the minister: it is 2012. How much longer will he be trying to protect the current competitive advantage of the union-dominated industry super funds? The underlying intention behind the MySuper reforms are undermined without a competitively neutral marketplace. The selection of default funds should therefore be selected by the employer, and the government should remove the need for Fair Work Australia's capacity to do so.

The explanatory memorandum indicated that superannuation funds would be able to charge for expenses incurred in the provision of intrafund advice. This is a term commonly used to describe financial advice that a superannuation fund provides to its own members. However, neither the bill nor the explanatory memorandum defines what this will mean in the context of the legislation. Instead, the memorandum foreshadows that it will be explained in subsequent legislation. This is not acceptable—we need clarity and certainty—but this seems to be the hallmark of this government. For the purpose of clarity for the industry, this must now be disclosed to give that clarity and certainty to all involved in the super fund industry but in particular the members of super funds.

The advice fee is proposed to be bundled into an administration fee. The consequence, however, would be that this would be charged to all fund members, irrespective of whether they access such advice. I reiterate: is this really achieving the best outcome for members of super funds? This hidden fee or secret commission, if you want to call it that, is completely inconsistent with the changes the government is seeking to impose on small business financial advisers through the Future of Financial Advice reforms. It appears that the minister has bowed to the pressure of the industry super fund network in introducing the provisions for intrafund advice.

The coalition will seek to amend the bill to ensure that no fees or personal financial advice can be bundled into an administrative fee for the purposes of the MySuper product and charged to all fund members irrespective of whether they access the service or not. These amendments do not prohibit MySuper funds from providing advice. They actually assist them in doing so, providing clear boundaries and removing some of the confusion. In the case of personal financial advice, it will be the person who accesses that advice who pays the fee, and not those members who do not use the advice service.

In regard to issues associated with larger employers, the coalition will seek to amend the bill by replacing the complex and unworkable threshold contained within this bill with a simple, easily quantifiable and effective test that defines a large employer as any employer with over 500 or more employees at the relevant time. Moving on to our next concern, as the current drafted bill would require a super fund with a MySuper licence to apply to APRA to provide super services to a large employer, the superannuation industry has argued strongly against this additional authorisation process, given that all funds offering tailored plans already need to provide a MySuper product. This is just more red tape from the government's red-tape factory. As the superannuation industry has pointed out, these additional processes will be cumbersome, time consuming, unnecessary and costly, and they will not add value to current members and consumers alike.

Most importantly, as previously stated, APRA should be able to continue to fulfil its role as the prudential regulator, which should be focused on risk governance without becoming entangled in commercial matters that affect neither factor. Trust is a word of enormous importance. Try running a bank, a business or an economy in the absence of confidence and trust, and you will know it cannot be done. As with all legislation, it is important to remember that good conduct is not dependent on governments, laws, regulatory bodies, civil courts or legal bodies. It is part of one's character and virtue and comes from—

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

Order! It being 2 pm, the debate is interrupted in accordance with standing order 97. The debate may be resumed at a later hour.