Mr HOCKEY(8.05 p.m.) —I wish to resume the debate on the Retirement Savings Accounts Bill 1996, the Retirement Savings Accounts (Consequential Amendments) Bill 1996, and the Retirement Savings Accounts Supervisory Levy Bill 1996.

Another group of individuals who may potentially benefit from retirement savings accounts are those persons close to retirement who may wish to minimise risk. Due to their capital protected nature, RSAs may be particularly attractive to those who in no way want to risk negative investment returns.

Employers who are looking for a convenient superannuation vehicle for small contributions under the superannuation guarantee arrangements will also benefit from the provisions of RSAs. Also, RSA providers will likewise benefit from being able to offer cost efficient delivery of superannuation and from enhanced customer relationships through the provision of one-stop shop services.

Let me note that the coalition has long pushed for more choices in superannuation.

Mr Price interjecting—

Mr DEPUTY SPEAKER —Order! The member for Chifley will be speaking soon. He will reserve his comments until then.

Mr HOCKEY —In fact, as far back as the late 1980s when we were in opposition, something that the honourable member for Chifley will become familiar with, we were suggesting the implementation of retirement savings accounts. However, the Labor Party wanted no part of retirement savings accounts. Why? It was because the ACTU was opposed to them.

The ACTU has been opposed to RSAs because under industrial award superannuation the ACTU got a say in the management of superannuation. Industrial awards do not generally allow for individual employees to make a decision on the fund where their contributions will be invested. The ACTU, and thus the Labor Party because they are hand in glove, have been happy leaving workers out of superannuation decisions altogether. That is a funny thing for a party that fancies itself as standing up for the rights of workers.

One of the more distinguishing features of the RSA is that it will be required to be capital guaranteed, meaning that the amounts invested cannot be reduced due to negative investment returns. Subject to any fixed term of interest payments on the deposit accounts, funds in retirement savings accounts will be fully portable. That is, an RSA provider will be required to transfer part or all of an account to another RSA or superannuation fund at the account holder's request. Either an account member, or an employer on an account member's behalf, will be able to make contributions to an RSA.

By virtue of their capital guaranteed nature, it is generally expected that the returns offered by RSAs will be less than those offered by other superannuation providers. For this reason a number of individuals and industry groups wanted the legislation to provide for a maximum amount that can be invested in an RSA. I draw this to the attention of the member for Chifley who scoffs at the suggestion that this is a positive reaction to what the workers want, to what the people want. May I suggest that the opposition follow our direction and you too, one day, some day, long into the future, well after the member for Chifley has retired, may be given another opportunity on the Treasury benches.

The government wishes to ensure that people's retirement incomes are maximised and it recognises that for some people RSAs may be an appropriate choice. The government strongly believes that restrictions on the amount that can be invested in RSAs are contrary to its policy of greater choice in superannuation and thus there will be no restriction on RSA balances.

Nevertheless, it will be mandatory for RSA providers to advise account holders of alternative balanced portfolio products offering potentially higher returns over the longer term when their balances reach $10,000. The government believes that this adequately addresses concerns regarding the expected low return from RSAs as compared to an investment based superannuation fund. Ultimately, account holders will be informed of investment options and will be able to choose if they wish to maintain their funds in a retirement savings account.

The supervision of retirement savings accounts is divided into two parts. First, the prudential supervision for institutional soundness of the RSA provider will be carried out under existing regulatory frameworks regarding, amongst other things, capital requirements and liquidity management. For example, in the case of banks, the prudential regulator is the Reserve Bank of Australia. Perhaps the Wallis inquiry will make a separate recommendation. In the case of building societies and credit unions, the prudential regulator is the Australian Financial Institutions Commission, AFIC, and state supervisory authorities.

The second regulatory element is functional supervision for compliance with retirement income and other non-prudential superannuation standards. These standards, which ensure that RSAs are maintained for genuine retirement purposes and provide for a well-informed membership, will be carried out by the Insurance and Superannuation Commission. Again, that is subject to the government's decision about the outcome and recommendations of the Wallis report.

It is the government's intent that the treatment of RSAs with regard to superannuation standards is as consistent as possible with that applying to existing superannuation products. For this reason, this bill is closely modelled on relevant provisions of the regulatory regime applicable to superannuation under the Superannuation Industry (Supervision) Act 1993. Does the honourable member for Chifley remember that one?

Finally, it is worth noting that, in connection with the preparation of this legislation, the government undertook substantial consultation with the relevant industry and consumer groups. Further consultation will be sought with regard to promulgating the regulations under the legislation.

It goes without saying that the primary purpose of superannuation is to provide individuals with a better income in retirement. This coalition government recognises that, in order to cope with the costs of the ageing population, it must encourage people to save throughout their working lives for their own retirement.

This bill, along with the government's other superannuation reform initiatives, provides a framework for a fairer and more flexible superannuation system that more readily meets the differing circumstances of individual Australians and, at the end of the day, encourages savings. This framework goes a long way towards addressing the serious flaws in the superannuation system that were left to us after 13 years of very hard Labor.