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

On behalf of Senator Boyce, the deputy chair, I present the report of the Parliamentary Joint Committee on Corporations and Financial Services on the Superannuation Legislation Amendment (Service Providers and Other Governance Measures) Bill 2012, together with the Hansard record of proceedings and documents presented to the committee.

Ordered that the report be printed.

by leave—I move:

That the Senate take note of the report.

This is the fourth tranche of the so-called MySuper package of bills. This package of bills seeks to create a legislated and regulated default superannuation product and prescribe in legislation the features that any default superannuation product has to comply with in order to be eligible for registration as a default super product named MySuper. The first observation is that this has been a very disjointed process. Instead of being able to consider this initiative as a whole—an initiative that we have, incidentally, supported in principle—the government has been coming forward with one bit of legislation after another, which has been very disruptive to the industry and very disruptive to people in superannuation. Having said that, this is meant to be the last MySuper bill and is meant to bring to a conclusion the legislating of the government's MySuper default superannuation initiative. So we on the coalition side are more concerned about what is not in the legislation than what is actually on the table in front of the Senate right now.

One of the big omissions from this legislation is the provision to ensure that superannuation boards across Australia have appropriate provision for independent directors. You would be aware that, as part of the corporate governance arrangements in superannuation, industry funds currently operate under what is called the equal representation model. We have heard much about the union dominated nature of that approach and some of the concerns that flow from that. Do not take our word on this—do not take our word about the need for concern about union dominated super funds. This is a concern that came from no less than Mr Jeremy Cooper, who, on behalf of the current Labor government, chaired a review into superannuation. If I can put this into context, we on the coalition side think that we need to continue to work towards achieving the most efficient, most transparent and most competitive superannuation system possible with appropriately high corporate governance standards. Only when we have the most efficient, the most transparent and the most competitive superannuation system, with appropriately high corporate governance standards where conflicts of interest are properly managed and there is appropriate corporate governance in terms of the independence of directors on these boards and so on, will we be able to ensure that the retirement savings of people across Australia are properly looked after and maximised.

I will quote some of the findings of the Cooper review, which Minister Shorten and the Labor government have steadfastly ignored because they are more focused on the vested interests of the union movement than on the public interest when it comes to corporate governance arrangements in superannuation. Mr Cooper, of the Cooper review, made these findings in relation to the current corporate governance arrangements and described the reasons as to why the current system is no longer contemporary or appropriate. He said:

The superannuation system has moved substantially away from single‐employer defined benefit funds that were dominant in 1993—

which is when these arrangements first came into play. He went on to say:

The introduction of fund choice, together with the prevalence of defined contribution funds today, materially changes (and in many cases severs) the close relationship that previously existed between the employer and the super fund.

The … representatives on many trustee boards are … are nominated by third party organisations, such as … trade unions. Current employment and industrial relations practices mean that these organisations do not necessarily represent all employers or all employees. Thus, the democracy that the equal representation policy appears to embed in the governance of superannuation funds is not always present in reality. The equal representation model also could result in a perception that individual trustee‐directors are required to answer to the organisation that appointed them in respect of trustee decisions or that they are dictated to by that organisation.

That is, of course, exactly what is happening and that is exactly what we are concerned about on the coalition side. He continued:

The large number of employers, employer organisations and employee organisations related to a fund can sometimes result in trustee boards being far larger than makes sense for efficient governance of that fund.

Equal representation leaves significant groups 'unrepresented.' Key among these are members who are pensioners … and members who have joined the fund because they exercised fund choice. These groups of members, already sizeable in some funds, can be expected to grow in the future.

This is the point: superannuation now is big business. We need to make sure that the corporate governance arrangements and standards reflect the changed nature of superannuation. Just because the union movement wants to desperately hold on to this legacy power and influence—this legacy hold that they have had over people's superannuation—is not a good enough reason for the parliament to protect those sorts of arrangements of the past. It is time to move forward; it is time to ensure that the corporate governance arrangements for superannuation are more contemporary and that they reflect the 21st century circumstances and context. We will be moving amendments when this legislation comes before the Senate to give effect to the Cooper review recommendation that there should be appropriate provision for independent directors on superannuation boards.

Furthermore, this legislation does not address a significant inadequacy that was previously raised by stakeholders right across the board in a bipartisan fashion, dare I say it. Retail funds, industry funds, self-managed super fund representatives—everybody who has talked to us about this legislation—say that it is unfair that at present it super fund trustees are not allowed to cap the fees that are being charged to Australians that find themselves in MySuper funds, these default super funds.

The proposition is this: under the legislation as it currently stands and as it has been put forward by Minister Shorten, if you have $1,000 in an account you might end up paying $30 in fees on a percentage basis of 0.3 per cent, say. If you have $10,000 in that account, you will end up paying the same percentage; if you have $1,000,000 in that account you pay the same percentage. You might end up paying $3,000 where somebody else pays $300 or $30 when the increased value that you receive from the service that is provided is not equivalent to that increased level of fee. Up to a point, it might be appropriate to have an increased fee with increased account balances. But there should be an opportunity for super fund trustees to cap that at an appropriate level. At the point when the fee in dollar terms becomes so high that it no longer reflects the cost of providing the service the super fund trustee should be able to act in the best interests of members who find themselves in default superannuation—and these are members who have not made active choices. The super fund trustee should be able to cut those fees. We will be moving amendments to that effect.

Let me make the general point that this government has had overall a very bad track record when it comes to superannuation. They have imposed more than $8 billion in additional taxes on people saving for their retirement over the last four years. And that is so far. The Labor Party will get all excited by that, because they think that they have something. They think that they can attack us because we have said for a very long time that we would not be proceeding with their low-income superannuation tax offset, which they linked to the mining tax. But it is not funded. It is a measure that, if this government were re-elected at the next election, they would scrap because they would have to. They would scrap it because it is not funded; they would scrap it because the mining tax has not raised any meaningful revenue.

Senator Thistlethwaite will jump up and down and say, 'No, we won't; no, we won't'—just like they said that we will not have a carbon tax under the government led by Julia Gillard and like they said in 2008 that they would not change superannuation, proceeding to reduce the government superannuation co-contribution scheme from $1,500 down to $500, targeting low-income earners. And like they said in 2010 that they would never, ever tax superannuation payments for people over 60. Now they are looking at doing exactly that. You cannot ever trust what Labor says before the election. They will tell everyone that they are targeting the rich and the wealthy but after the election they will target the middle class and low-income earners, as they always do. (Time expired)

Matt Thistlethwaite (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I rise to make a short contribution on the report of the Joint Committee on Corporations on Financial Services regarding its inquiry into the Superannuation Legislation Amendment (Service Providers and Other Governance Measures) Bill. This bill is the fourth tranche of the government's MySuper reforms. It deals with governance elements in the stronger super reform package. Australia's superannuation system was a very complex beast, and the architecture reflected the wealth of changes that have been made since 1992, often reflecting the different ideological views of the major parties regarding retirement incomes policy in this country. As it changed it became more and more complex, and as it became more and more complex fund managers and product writers found new ways to make money, often at the expense of innocent and ignorant members—the so-called beneficiaries of the superannuation system, the members.

As the system became more and more complex they became more confused, more ignorant and, unfortunately, more disengaged regarding superannuation. We got to situations where it was not uncommon to see a young worker with four or five different superannuation accounts, with two or three of those accounts inactive, receiving no contributions but paying fund managers, commissions, paying for products and paying fees for money that was essentially an asset for them but was doing them no good over the longer term.

When this government came to office we pledged to make the superannuation system fairer. We recognised that the system had gotten out of control and needed to be simplified, and that is what we have done through the Stronger Super reforms, in particular the introduction of the MySuper products. We have made it such that the system is now operating in the interests of members. Rather than operating in the interest of fund managers and product writers, it is now very much balanced in the interests of members. And, as Senator Cormann outlined, this came about as a result of the government's Cooper review, the most comprehensive study into the health and wellbeing of our superannuation system since its inception in 1992. A major part of that is the MySuper reforms, which at their heart ensure that there is a simple, easy-to-understand, easily comparable product available for all superannuation fund members in this country. This is the final tranche in that set of reforms.

The government has approached this in the tradition of making superannuation fairer and simpler. Overwhelmingly the Joint Committee on Corporations and Financial Services is supportive of this bill and its passage, and that is reflected in the committee's report. The bill strengthens the governance and integrity of the superannuation system. For example, many superannuation fund rules to date allow trustees to appoint or use a particular service provider on behalf of members, most notably in respect of insurance products. Their rules will say that you must use a particular insurance product that is often related to or has some relationship with that particular fund, even though in many respects it was not in the best interests of the members. There were particular rules that ensured that occurred. Now this is outlawed. No longer will trustees be obliged and mandated to use particular service providers when it comes to deciding which products to offer its members—and on behalf of members. This is consistent with the government's approach to reform in this area, of ensuring that the superannuation system operates in the best interests of members.

The reforms also provide for APRA to issue infringement notices for certain breaches of the Superannuation Industry (Supervision) Act. They require persons to seek leave of the court before bringing actions against an individual director for a breach of their duties. The reforms extend legal defences available for trustees and directors to proceedings involving breaches of MySuper obligations. They also require trustees to provide reasons for decisions made in relation to a complaint and they increase the time limit for members to lodge complaints with the Superannuation Complaints Tribunal.

Throughout the process of these reforms the government has been conscious to consult widely with players in the industry. I was pleased to hear in the hearings that related to the inquiry into this particular bill that many of, or in fact most of, the players in the industry were satisfied with the government's level of consultation. I would like to draw the Senate's attention to a quote from a representative of the Australian Institute of Superannuation Trustees when he appeared before the committee. He said:

AIST acknowledge the preparedness of government and Treasury to consult with the industry about all of the Stronger Super changes and in particular the matters that are contained within this bill. That is reflected in the changes between the consultation draft and this bill, and it is also reflected in the overwhelmingly positive comments that we and others have made about the legislation in our submissions.

That is the view of industry—those who work in the superannuation game in this country—about the government's approach to these important reforms. They have been met with overwhelming positive responses and vindication of this government's approach to making superannuation simpler and fairer and in the interests of members.

Senator Cormann raises his bugbear once again—the thorn in the saddle for the opposition—that unions have positions on superannuation fund boards; that workers are represented in managing their funds in this country. They have never got over the fact that since 1992, when the compulsory superannuation system was established in this country, workers have a hand in managing such large pools of investment funds in this country. Not only do they have a hand in managing such large pools of investment funds but they do a great job. Consistently since 1992, union and employer managed super funds, commonly known as industry funds, have produced lower fees and better results for members when it comes to comparing the performance of those funds with more expensive company based funds and other corporate funds. The opposition have never got over that fact. Every time they speak about superannuation they bring up that old chestnut that they cannot get over: the fact that workers have a say in the management of superannuation funds in this country and that they have done a good job.

The approach to superannuation and the difference between the parties is highlighted by one of the policies that Senator Cormann raised in his concluding remarks, and that is the Low-Income Superannuation Contribution scheme. When we came to government we ensured that the concessions available in superannuation were targeted well and truly at the lower end of incomes in this country, that low- to middle-income workers would receive the appropriate incentives to ensure that they saved for their retirement, and that reflects the fact that we have an ageing population and we need to plan for adequate retirement savings in this country. We instituted the Low-Income Superannuation Contribution, ensuring that anyone who earns less than $37,000 in this country effectively pays no tax on their superannuation, as an incentive to ensure that they remain in the workforce rather than drop out onto welfare, and provides for adequate retirement savings as their working years move on. But what is the approach of the opposition to this important policy? They will get rid of it if they are elected. That was confirmed by Tony Abbott, the Leader of the Opposition, in his National Press Club speech last week in response to a question by a journalist. He said that they will get rid of the low-income superannuation contribution—a tax increase for 3.5 million workers in this country, the lowest paid workers in this country. They are predominantly women who are working part-time. That exemplifies the differences between a Labor government and a coalition government when it comes to retirement incomes.

Question agreed to.