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Tuesday, 25 March 1997
Page: 2343

Senator MARGETTS(12.32 p.m.) —I am rising to speak on the Retirement Savings Accounts Bill 1997. It is a complex issue but I would like to start by saying that retirement savings accounts are promoted as choice. We believe they are not choice; they are effectively the same thing as other superannuation vehicles—that is, a requirement that workers reduce their disposable income in an effort to ensure that government can in the future reduce its obligation in respect of older people. It is a further step in the dismantling of the universal pension. That step began under Labor.

To the extent that retirement savings accounts are different from other vehicles for obligatory self-funded retirement investment, they are different because they send this obligatory income reduction to banks rather than to other financial institutions. They are also different in that in most superannuation funds the investments are under at least some minimal control of some group at least theoretically representing the contributors. RSAs, retirement savings accounts, represent investment that is not transparent and which is determined by banks.

This is then a rather transparent attempt to curry favour with banks by giving them a cut in the large $260 billion pool of superannuation funds, a pool that is growing at a rate of $25 billion to $30 billion a year. Banks are increasingly large transnational organisations. Investment in the banking sector is open to international players now. Increasingly, even those banks whose character is presented as `Australian' have substantial investments, including ownership of banks abroad.

Ownership of foreign banks often entails a management structure where foreign interests are directly represented and funds are freely transferred and invested in any nation and assets collected in this nation may be lent in any nation. The interests of management in such banks may be totally divorced from the interests of Australia, Australian investors, Australian industry or the Australian economy.

Alternatively, superannuation companies are also large concentrations of capital but still predominantly national in nature. Even so, it is a concern to the Greens (WA) that superannuation funds are increasingly investing in large corporations and increasingly investing overseas. This goes with the computer formula for investment.

An important difference is that, with superannuation funds, the fund members have put some input into the investment regime of most funds, even if that is through representatives on fund management committees. With RSAs the banks have complete discretion as to the investment of RSA contributor funds. Any control lies solely in the decision to contribute to an RSA.

Another more basic issue lies with disclosure of investment and investment strategy where complying superannuation funds are required under the SIS regulations 2.29 and 4.09 to provide information about investments and investment strategies to members. Senator Sherry would certainly remember that this was a commitment that he agreed to in a debate about three years ago in relation to superannuation funds, that people should have the right to know where their portfolios are invested in superannuation.

RSAs seem to have no equivalent requirement. Not only do people have no power over their investment, they may find it difficult to determine the nature of those investments. It is therefore of concern when the main report, on page 49, seems to perceive disclosure issues as relating solely to fees, charges, rates of return and such issues outlined under 3.64. The Democrats, on page 62 of the committee report on this bill, welcome the statement by the Treasurer (Mr Costello) that disclosure regulations for RSAs will be `quite similar' to those of superannuation funds. Given the lack of disclosure for compulsory funds, and the fact that under section 51 of the act RSA membership may be effectively compulsory, I am not so reassured.

In many respects, if compulsory savings programs along the lines of RSAs are the choice of parliament, we would prefer to see perhaps credit unions used as a vehicle, since depositors are voting members. There are effective size limits and some means at least of regional control, and investment patterns by credit unions tend to direct capital to small and medium, locally and regionally owned businesses which provide the majority of employment.

It has been a continual call from the Greens to assure a greater level of choice in obligatory retirement savings schemes. However, the focus of choice is not on which financial institutions can make similar investments but on the choice of investment targets.

Particularly, we support options which support the Australian economy and employment within an ethical context. We have several times pursued options within superannuation funds for: investment in locally or regionally owned small or medium business; ecologically sustainable investment; non-military oriented peaceful investment; and investment that does not exploit people from developing nations.

There has also been a call from the Greens to recognise that obligatory investment programs such as compulsory superannuation or RSAs are not necessarily the best investment vehicle for workers, and that investment in such things as a small business or a home may provide more substantial and far-reaching benefits. This goes beyond the direct benefits as financial investments and recognises that there may be substantial and ongoing human benefits in terms of use value of such investments and, in the case of investment in small business, in ensuring the capacity of older people to continue working.

Earlier this year, there was a major uproar over the requirement that unemployed people over 55 utilise superannuation assets before being eligible for full unemployment benefits. How can this treatment of older workers be justified at the same time as workers are being required to contribute to superannuation funds or RSAs, ostensibly for their retirement, and to increase savings?

Under legislation announced at the last budget, from September 1997, those applying for unemployment or other benefits who are above the age of 55 are given a different status from those other unemployed people and expected to utilise their savings, including superannuation savings, before becoming a burden on the taxpayers. This is normally an exempt asset for younger unemployed people. Not only are assets tested; more perniciously `deemed income' is assessed. In other words, if a superannuation fund earns real or `deemed' interest, this is counted as income, and it comes off unemployment benefits at a rate of 50c in the dollar. This utterly undermines any rhetoric in relation to savings and self-funded retirement, showing it to be sheer hypocrisy on the part of government. The cost to savings and self-funded retirement was predicted in the last budget as in excess of $44 million per year, taken from the superannuation of unemployed people aged 55 to 65.

RSAs are being promoted both as an increase in choice and as a means of protecting small retirement contributions made compulsorily by employers or perhaps by employees if that aspect of the Labor tax-break promise goes ahead. Reading from the papers this morning, we have still to see what is going to happen there. Under section 51, RSA legislation can allow companies to open retirement savings accounts for employees without their consent. This effectively echoes the type of superannuation funds where membership in a specific fund is compulsory. It is not consumer choice. It just allows companies to make deals with a bank, in competition with a superannuation fund. It may mean that employees are forced to support a transnational bank instead of being forced into a certain superannuation fund. This is of particular concern, given that it has been acknowledged that retirement savings accounts are likely to provide lower returns than superannuation funds.

Under the Small Superannuation Accounts Act 1995, small accounts cannot be duplicated—there can be only one account—and notification must occur when accounts reach $1,200, when workers are advised to transfer the amounts to a real superannuation fund. Contrast this to the retirement savings accounts where notification and suggestions—not compulsions—to transfer to superannuation funds do not occur until accounts reach $10,000. Contrast this with the mechanisms allowing multiple RSAs.

The Greens (WA) are fundamentally opposed to RSAs as: unnecessary; failing to provide any significant benefit or choice; likely to create situations where workers are compelled to support RSAs; and creating an investment vehicle that is more likely to be counterproductive to the interests of the Australian economy than to provide either jobs or ecologically or socially sustainable development. Nonetheless, we support the majority of Labor and Democrat amendments as minor improvements to a bill which, from what we can see, is likely to pass with a nod from the Senate.