Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I table a supplementary explanatory memorandum relating to government amendments to be moved to this bill. I also seek leave to move government amendments (1) and (2) on sheet BG 245 together.

Leave granted.

I move government amendments (1) and (2) on sheet BG 245 together:

(1) Clause 2, page 2 (after table item 1), insert:

(2) Clause 2, page 2 (table item 3), omit "However, if the provision(s) do not commence before 1 January 2013, they commence on that day.".

These amendments relate to the provisions which enable trustees to apply to APRA for authorisation to offer a MySuper product. Currently these provisions will commence on 1 January 2013, allowing applications to offer a MySuper product to commence from this day. However, a key requirement for the application to offer a MySuper product are contained in the Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill 2012, which is the tranche 3 bill. Importantly, this bill includes elections to charge commissions and to move members' existing balances to MySuper that a trustee will have to make with their application to offer MySuper products. This tranche 3 bill is currently in the House of Representatives and applications to offer a MySuper product shall not commence until that bill is passed. Accordingly, the amendment from the government changes the day on which the provisions of the bill commence to a day fixed by proclamation to ensure that applications for a MySuper product will not commence until those key requirements in the bill to which I have referred have also come into effect.

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I place on record that the coalition supports those amendments, but I make the point that the reason there is a need for these amendments is the exact reason that I pointed to in my second reading debate speech: the disjointed, ad hoc and, quite frankly, incompetent nature with which this reform was progressed by the government. We have had three tranches instead of having one piece of legislation dealing with the MySuper reform holistically so that we could have proper scrutiny of what is on the table and a proper holistic assessment of the merits or otherwise of what is being proposed. The government have been chopping and changing, rushing things and then slowing things down, and they really have not known where they were going with it. Now, because they got stuck with the timing, they need to make these sorts of amendments. Otherwise, they will come unstuck with the practical implementation. We understand why the government have to do it and on that basis we will support it.

Question agreed to.

by leave—I move amendments (1) to (4) and (6) to (8) on sheet 7277 together:

(1) Schedule 1, item 6, page 4 (line 12), after "29T", insert "or satisfies the provisions of section 29TB".

(2) Schedule 1, item 9, page 9 (line 24), omit "or 29TB".

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

(4) Schedule 1, item 9, page 11 (lines 7 to 14), omit paragraph 29TB(1)(b), substitute:

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

(6) Schedule 1, item 9, page 12 (after line 15), 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 30) to page 15 (line 8), omit paragraph 29U(2)(b).

(8) Schedule 1, item 9, page 21 (line 14), omit "sections 29T and 29TB", substitute "section 29T".

Before I start to make a few points in relation to these amendments and the reasons for them, I will make a quick observation about some comments that Senator Thistlethwaite made in his second reading debate speech. Senator Thistlethwaite essentially told the Senate that the reason the coalition is in favour of competition in the default super fund market is because we are concerned that industry funds are so good and that competition is the only way that we can somehow tear industry funds down—because we hate industry funds. That is a completely ridiculous and inherently illogical argument. If industry funds are as good as Senator Thistlethwaite says they are—and I hear these arguments all of the time—and if they so much better, with lower fees, better service and higher performance, then surely they would thrive in a competitive environment.

I have made the point quite regularly to senior executives and leadership of some major industry super fund organisations that the current Labor government is actually not doing them a favour by creating this anticompetitive, closed shop process through Fair Work Australia, which protects them and shields them from genuine competition. Quite frankly, if they could thrive in a genuinely competitive environment, how much better would that be? It would force everybody else in the market to aspire to rise to that same level and it would provide a genuine engine in that market to ensure that there was innovation and improvement in the value proposition across the board. Nobody is ever so good, I would say to Senator Thistlethwaite, that they cannot be even better for being on the receiving end of some competitive tensions.

Of course, that is something that the Labor Party fundamentally does not understand, but we understand that only the most efficient, the most transparent and the most competitive superannuation system, with appropriately high corporate governance standards, will ensure that the retirement savings of people across Australia are maximised, including and in particular the retirement savings of those Australians in default superannuation funds. When it comes to corporate governance standards, do not go any further than the government's own commissioned Cooper review, which firstly found that the so-called current equal representation model in the industry, where you have equal numbers of union representatives and employer representatives managing a fund, is no longer appropriate, no longer contemporary, given the size of the market we are dealing with and given where corporate governance standards are in 2012. But I am getting a bit diverted.

On the first set of amendments, the bill as drafted would require a superannuation fund with a MySuper licence to apply to APRA prior to providing superannuation services to each large employer. Five organisations—BT, Mercer, the Corporate Superannuation 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 inquiry into the bill that this additional authorisation process for tailored MySuper products for large employers is unnecessary, given that all funds offering such tailored plans are already authorised to provide a MySuper product. The superannuation industry across the board made the strong point that this additional process would be cumbersome, time consuming, unnecessary and costly.

Of course, here we have it. This government has never seen a bit of red tape it does not like. This government has never seen a bit of red tape, ultimately unnecessarily pushing up costs for people in super funds, that it does not like. Given the choice between an efficient process or some additional red tape, this government will invariably go for the additional and unnecessary red tape, and that is what they are doing on this occasion. Representatives from across the superannuation industry expressed strong concerns to the PJCCF inquiry that this additional authorisation process would move APRA away from its proper and very important role as a prudential regulator focused on risk and governance and into areas of commercial interest between funds and large employers which have nothing to do with its regulatory role. If this provision is not amended, fewer Australian workplaces will have super arrangements which reflect their employees' specific needs.

Again, this is maybe not something that the Labor Party understands, but different workplaces and different sectors of the economy do happen to have different needs, including when it comes to being able to tailor a particularly attractive superannuation proposition. You would have thought that any government that is focused on maximising the benefits for Australians saving for their retirement would want to provide maximum flexibility to ensure that these MySuper products can be tailored in such a way as to be as efficient and as cost-effective as possible to the specific needs in specific workplaces. But no, clearly the government is not that focused on the employees' needs. Who knows what interests it is focused on. 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 should still allow APRA to disallow a noncomplying fund. Such a process would address the public policy concern that the existence and number of employers plans are unclear to APRA. It would require regular reporting without undermining the efficiency, competitiveness and commerciality of tender processes, and the coalition amendment would also ensure that APRA continues to fulfil its proper role as a prudential regulator, which should be focused on risk and governance without entangling it in commercial matters which affect neither factor.

I have moved opposition amendments (1) to (4) and (6) to (8), but those comments also apply to amendment (9), which will have to be moved separately because the voting pattern, in a technicality that always escapes me, is somewhat different. From your smile, Minister, I can see that you know what I am talking about. It seems that to achieve what we want to achieve, we will be voting in favour of opposition amendments (1) to (4) and (6) to (8), and we will be opposing schedule 1 in the following terms:

(9) Schedule 1, item 12, page 25 (line 12) to page 26 (line 15), TO BE OPPOSED.

With those few words on these amendments, I commend our amendments and our recommended approach to the Senate.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

The government does not support the opposition amendments. These amendments would mean that a tailored MySuper product does not have to be authorised by APRA and would allow a trustee to accept contributions even if APRA had not assessed the product. It would be a fairly unique approach, given that licensing regimes would generally not allow something to commence until the regulator had made a decision. I am advised that APRA has made clear that authorisation is an important entry control for My Super products, ensuring that there can be an upfront assessment that the product meets the legislative criteria before member contributions are placed into the product.

APRA has indicated in draft guidance material that where a trustee has already been authorised to offer a MySuper product, authorisation of subsequent tailored MySuper products would only need to focus on key differences from a fund's main MySuper product. As such, where there are few differences in a tailored MySuper product, the authorisation process is therefore expected to be relatively quick. My comments, consistent with Senator Cormann's apply also in relation to opposition amendment (9).

Question negatived.

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

In order to facilitate the operation of the Senate tonight, I will not be calling a division, but I wish to place on record that the Labor and Greens senators in the chamber indicated that they were opposed to our amendments. Of course, we are in favour of our amendments and we are very disappointed with this outcome. My comments are just to facilitate progress

Doug Cameron (NSW, Australian Labor Party) Share this | Link to this | Hansard source

The question is that item 12 in schedule 1 stand as printed.

Question agreed to.

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I move opposition amendment (5) on sheet 7277:

(5) Schedule 1, item 9, page 12 (lines 1 to 15), omit subsection 29TB(2), substitute:

There were significant concerns expressed to the Parliamentary Joint Committee on Corporations and Financial Services, which inquired into this bill, about the benchmark above which large employers can tailor funds for their employees. Provisions of the bill allow for such tailoring where the employer contributes to a fund on behalf of 500 or more members. Many participants in the superannuation industry submitted to the PJC inquiry that the threshold in its current form is complex, unworkable and may have a number of unintended consequences. The organisations expressing their concerns included the Financial Services Council, the Corporate Super Specialist Alliance, Mercer, and the Association of Superannuation Funds of Australia—a broad cross-section of the industry, as you can see. 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. I commend the amendment to the Senate.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I indicate to the chamber that the government opposes the amendment. A test based solely on employees as opposed to members would allow an employer to obtain a tailored MySuper product for substantially fewer than 500 members. The government believes it is appropriate to leave the test as it is in the government's bill before the chamber.

Question negatived.

Bill, as amended, agreed to.

Bill reported with amendments; report adopted.