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

I have not seen the Clerk look so anxious for some time—hoping someone was here to speak on this bill. Clerk, I am here; I am trying to be as dependable as your good self. I rise to speak on the government's Superannuation Legislation Amendment (Service Providers and Other Governance Measures) Bill 2012. The bill before the House seeks to introduce the fourth tranche of MySuper legislation and also makes governance changes flowing from the Cooper review into superannuation.

MySuper is a new, supposedly low-cost superannuation product that replaces existing default superannuation fund products. If the passage of the third tranche of MySuper legislation last year, the coalition scored a significant policy victory for Australians planning for their retirement. They were at risk of having their savings transferred automatically, without their prior approval, to a government legislated MySuper account. The government was originally seeking to move two separate amendments in the consideration in detail of this bill. We now understand that the government has adopted one of our amendments and we are very pleased and encouraged to hear this.

The coalition will now withdraw our amendment which we had already circulated under Mr Hockey's name during the consideration-in-detail stage of the debate and, instead, move a revised amendment. The revised amendment relates to the Cooper review recommendation that an equal representation model should be adopted on superannuation boards. Recommendation 2.7 of the Cooper review stated:

For those boards that have equal representation because their company constitutions or other binding arrangements so require, the SIS Act should be amended so that no less than one‐third of the total number of member representative trustee‐directors must be non‐associated and no less than one‐third of employer representative trustee‐directors—

Government Members:

Government members interjecting—

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

Thank you; I am getting some encouragement to elaborate on these key quotes! As I was saying:

… trustee‐directors must be non‐associated.

The government has failed to act on this recommendation.

The coalition will move amendments to require that superannuation boards contain one-third in number of independent directors or trustees. Only the most efficient and competitive superannuation system, with the highest standards of corporate governance, will deliver the best possible value to superannuation fund members. Continuing to improve corporate governance in the superannuation industry will help to increase Australians' level of confidence in the system. This in turn will encourage additional voluntary superannuation contributions. It is time to bring a greater degree of independence to the boards of union dominated industry superannuation funds.

Our second amendment, which we have flagged, will seek to allow trustees of MySuper accounts greater flexibility in how they charge fees, especially in relation to administration fees that are asset based. The government has now seen the light on this issue and is seeking to move its own version of this amendment today. I will have more to say about that shortly. If our amendment is unsuccessful, the coalition will not oppose the passage of this bill through the House.

The bill contains a range of specific changes to superannuation laws which relate to governance arrangements and obligations. The first of these changes seeks to amend the Superannuation Industry Supervision Act to override any provision in the governing rules of an APRA regulated fund. These rules require the trustee to use a specified service provider in relation to any services in respect of the fund. These amendments came from a recommendation also out of the Cooper review. They seek to mandate governing rules requiring the use of certain service providers to limit trustee ability in order to determine if such an arrangement was in the best interests of fund members. The review noted that trustees should still be able to appoint a named service provider if it is in the best interests of the members, but should not be bound to do so.

The bill also amends the SI(S) Act to provide APRA with the power to issue infringement notices for certain breaches of the act. APRA currently has the power to issue infringement notices but only for the late lodgement of data returns. The Cooper review recommended that APRA be given the power to impose infringement notices and fines as an alternative to criminal prosecution for certain offences. The new power applies to a range of existing breaches, including not putting the required contributions into a MySuper account, not notifying as soon as practicable each beneficiary about an acting trustee's appointment, not having rules in place for the appointment of member or independent representatives when required to do so, not meeting APRA's deadline for receipt of a report relating to an investigation, and funds accepting contributions by an employer sponsor contrary to the regulator's written notice to the fund's trustees.

This bill also seeks to require trustees to give complainants reasons for their decisions in relation to a complaint where a complainant requests such reasons. The complainant must make a request in writing. A response must be provided within 28 days, though ASIC may permit longer periods for reasons to be given in the case of death benefit complaints.

The bill seeks to remove a regulatory exemption where the RSE, or registrable superannuation entity, also manages a non-superannuation managed investment scheme. Some RSE licensees, in addition to managing RSEs, are also the responsible entity of one or more non-superannuation registered management investment schemes. Generally the responsible entity controlling a managed investment scheme must comply with a range of general obligations under section 912A of the Corporations Act 2001. Currently bodies regulated by APRA, including RSE licensees, are exempt from the requirements set out in paragraphs 912A(1)(d) and (h) of the act.

RSE licensees are required to satisfy risk management requirements and requirements for adequate resources of a human, technological and financial variety imposed under the SI(S) Act and SI(S) regulations. However, these requirements are not designed to ensure that adequate resources or risk management systems are maintained in respect of the non-superannuation business of RSE licensees that also manage registered managed investment schemes. The Cooper review recommended that dual regulated entities meet Corporations Act financial resource requirements. These changes remove the regulatory exemption. Whilst generally supportive of this change, certain stakeholders expressed a desire to ensure that this does not increase capital backing requirements through the duplication of responsibilities.

The bill requires complainants to seek leave from the court to bring on an action where a director has been accused of having breached their duties under the SI(S) Act. In order to grant leave, the court must take into account whether the applicant is acting in good faith and whether there is a serious question to be heard. These amendments are designed to prevent frivolous and vexatious legal action being brought against directors. The amendments also give directors a defence of having acted with 'reasonable precaution' or if a 'reasonable mistake' was made in relation to a MySuper obligation. These defences are already available if directors act in contravention of a covenant.

The bill also contains a range of consequential amendments which amend the SI(S) Act. The measures contained in this bill are broadly supported across the superannuation industry and the coalition does not oppose them. However, once again the government has been forced to bring in a raft of changes to its own legislation after it has been introduced. These changes follow an inquiry by the Joint Committee on Corporations and Financial Services, which found many serious issues in the bill. It is good to see the government does occasionally recognise its mistakes and adopt measures put forward by the coalition, such as the cap on fees. We will not oppose these changes and will withdraw our amendment on fee caps.

This bill is the fourth, and the government anticipates last, tranche of legislation implementing the MySuper proposal that arose from the Cooper review. The first bill, tranche one, established core provisions of MySuper which included rules around the charging of fees in relation to member accounts. This included, in effect, a ban on caps for administrative fees. As paragraph 6.14 of the explanatory memorandum of the tranche one bill discussed:

For any fee that applies to all members of the MySuper product, such as an administration fee or an investment fee, each member is to be charged the fee under the same charging rule. For example, if one member is charged a percentage of their account balance in relation to the MySuper product as an administration fee then each member of the MySuper product should be charged the same percentage of their account balance in relation to the MySuper product at the same point in time.

This caused an adverse reaction among industry stakeholders at the time. These stakeholders as well as the coalition were anticipating that the government's current and final MySuper bill tranche 4, the one before us now, would include amendments to remove this unnecessary and counter-productive requirement. However, such amendments were not forthcoming by the government.

Another one of the government's amendments, which is to be considered today, is moving the final composition of the product dashboard into regulations. This is an acknowledgement that the government could not get a consensus on what information would be given to consumers as a quick way of comparing funds. We will not oppose this change; however, we do put the government on notice to be balanced in its approach and not to favour their mates who are in industry super funds.

One of the measures removed by these amendments was the measure of liquidity. For some reason the industry super funds were opposed to this being included. If it does not appear in the regulations then the government will have some serious questions to answer. The product dashboard cannot be about promoting the interests of one part of the industry alone. We reserve the right to change the composition of the product dashboard if this government gets it wrong.

As I mentioned, the bill before the House represents the government's fourth tranche of legislation implementing the MySuper proposals that followed the Cooper review into superannuation handed down some 2½ years ago. The coalition has along the way sought to improve the government's legislation as it has haphazardly implemented the findings from the review. The coalition has moved a vast number of amendments seeking to close anomalies and amend legislation to avoid unintended consequences as this government has rushed through changes. Most recently we scored a significant policy victory by ensuring that Australians' choices were preserved and superannuation balances were not automatically transferred without their prior approval to a government legislated MySuper account.

The coalition, as a way forward for Australia and those interested in their retirement savings, has begun consulting with a cross-section of senior superannuation industry stakeholders and experts. The coalition is acutely aware of the threat this government is planning to pose on the nation's retirement savings system in the form of more new taxes on superannuation savings in order to help Labor plug its deteriorating budget this coming May.

To date this Labor government has hit Australians' savings with more than $8 billion in increased taxes and charges on superannuation over the last five years since coming to government and $3.3 billion of this has come from this government's hit on low-income earners through their various reductions to the government super co-contributions scheme established under the previous coalition government. The government reduced the contribution from $1,500 to just $500. The government is also lowering the thresholds at which they phase out.

A coalition government, if we were able to earn the support of the Australian public at the next election, would look to provide certainty and stability in superannuation by not making unexpected detrimental changes to the superannuation system in the next term. This would allow people to save for their retirement and to plan with confidence. A coalition government, if elected, plans to: increase the compulsory superannuation contribution from nine per cent to 12 per cent; improve corporate governance arrangements for superannuation; properly address the issue of excess contributions to make sure Australians saving for their retirements are not unfairly penalised for genuine unintended errors; pursue opportunities to cut unnecessary red tape in superannuation; remove regulatory barriers currently restricting product innovation and improved options to manage financial risks in the retirement phase; and revisit concessional contribution caps and super co-contributions for lower income earners once the budget is back in a strong enough position.

And, finally, a coalition government will conduct a financial systems inquiry, which will include the superannuation industry. A coalition government will continue to consult with the broad cross-section of stakeholders in the superannuation industry in the lead up to this year's election.

As stated at the outset, I will be moving an amendment circulated in the name of Mr Hockey during the consideration in detail stage of this bill and I can also foreshadow that the coalition will allow the government's own amendments to this bill to pass through the parliament without objection.

Debate adjourned.