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Thursday, 4 December 2003
Page: 23972


Dr WASHER (1:35 PM) —I thank the members for Ryan and Moncrieff for their input into this. I notice that, unfortunately—and I sympathise with the member for Braddon over there—the rest of the booked speakers are missing in action, so the opposition is diminished. They have gone home—or gone fishing or whatever. It is a pleasure to talk on the Superannuation Legislation Amendment (Choice of Superannuation Funds) Bill 2002. I want to quote Benjamin Franklin. In 1789, he wrote the words:

... in this world nothing can be said to be certain except death and taxes.

More than 200 years later, a third certainty is emerging—that is, we have an ageing population. Australia, like most industrialised countries, is experiencing the ageing of its population through advances in medicine and better standards of living. In 40 years time, the number of people aged over 65 years will be doubled and the number of people over 85 years will be four times greater than it is today. That, together with the declining birth rate of the 1970s, means a much smaller work force will be contributing to the tax base required to support a rapidly increasing ageing population. That is one of the reasons why this bill, which provides choice in and portability of superannuation, is so important. The policy objective of the choice of fund proposal is to provide employees with greater choice as to which complying superannuation fund or RSA will receive compulsory superannuation contributions on their behalf from their employer.

This element of choice will give employees freedom to make decisions about their retirement nest eggs and will create greater competition within the superannuation industry and, in turn, greater competition within the industry will place downward pressure on fees and charges. Increased competition and better returns will benefit all people with superannuation and will reduce, over a period of time, pressure on the age pension system. The age pension system is likely to come under pressure in the middle of the next decade, when the baby boomer generation starts retiring. So it is increasingly vital that we take steps now to encourage more people to save for their retirement and, importantly, to give them a choice about where their money is invested and how it is administered.

It is difficult to argue against the right to choose. The ability to decide where to invest your money should be a straightforward and basic democratic right. There would be outrage in the community, as suggested before, if it were ever suggested that people should have their homes, bank accounts or insurance policies chosen for them.


Mr Sidebottom —These speaking notes sound similar to mine.


Dr WASHER —Great thinkers think alike, Sid. One of the most significant investments that many people will ever make—and which will determine their standard of living in retirement—is beyond their control. Regardless of the fees they are charged, the returns their funds achieve or the services their funds deliver, employees cannot change their fund. Even though it is the worker's money and it is the worker paying the fees, the decision on which fund to invest in is made by the employer or, through their award, by their union—which might relate to some of the problems opposite. Imagine if in order to get a home loan the lender reserved the right to choose your house or your employer chose the bank account into which your wages should be paid. These scenarios would be totally unacceptable, and yet that is a scenario that currently exists with regard to superannuation, except in my home state of Western Australia.

To all those who argue against choice in superannuation, let me say that the Western Australian experience has been positive; we already have choice. The Western Australian experience has shown that the compliance burden for employers can be contained. The market has evolved to keep employer costs to a minimum. For example, the largest WA based super fund operates a clearing house for employers to make contributions efficiently and cheaply to multiple funds. Employers who use a clearing house need only write one cheque and provide details of the funds of which their employees are members, and it is handled.

Detractors of this legislation also argue that most people are not superannuation experts—neither are they necessarily real estate, banking, financial planning or insurance experts. But they should be given the choice to consult an expert, just as they do for other investments such as buying a home or investing in property. Of course, the status quo can remain for those who choose it. Anyone happy with their current superannuation arrangements can choose to retain them. It is all about choice—choice to direct your money to a fund of your own choosing or choice to leave your contributions where they are.

The $6 billion in `lost' superannuation suggests very strongly that people tend to forget about money that they have no ability to control. If people actively have control over their own money, we should see a marked improvement in the level of interest in superannuation and a heightened awareness of participation in retirement saving programs. Research shows that most Australians want to be able to choose their own superannuation fund and have the freedom to move their money as and where they like. More than 70 per cent of respondents to a survey said that they would like `full choice of fund'. Yet still the opponents of choice say no. They appear to believe that it is preferable to let consumers languish in a fund with higher fees and charges and poor returns rather than focus on achievable reforms.

It is important that a strict regime of disclosure accompany the successful introduction of choice, and that regime is already in the pipeline. From March next year, financial advisers will not only have strict legislative disclosure requirements; they will also have to have passed more stringent licensing requirements. To comply with their obligations under the FSRA, planners will be required to disclose fully and completely all of their fees, charges and commissions. Similarly, all fees and charges associated with the products they are recommending will have to be disclosed. Where a planner's advice may have a detrimental impact on the client, the planner is required to explain clearly what that might be. For example, a planner advising a client to move to a new superannuation fund would clearly have to indicate if the ongoing fees and charges in the proposed new fund exceed those of the client's current fund. With open and honest disclosure, the client would then be in a position to make an informed choice over where his or her superannuation contributions should be invested. No employee will be obliged to change their fund if they are happy with their existing arrangements.

This legislation is all about empowerment, not compulsion. With more than $A500 billion invested in superannuation and representing for most Australians their second largest asset after the family home, superannuation is hugely important. The government is committed to ensuring that the superannuation system is robust, safe and flexible and that it meets the needs of Australians in retirement. The Superannuation Legislation Amendment (Choice of Superannuation Funds) Bill 2002 builds on that commitment by giving choice to the employee and creating greater competition within the industry. I commend the bill to the House.