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Wednesday, 22 August 2012
Page: 9536

Ms O'NEILL (Robertson) (10:59): I rise today to speak on the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011, which will be another delivered election promise from this Labor government. The bill is all about providing a simple, clear superannuation alternative for thousands of Australians. We believe that superannuation is a right owed to working Australians. It should be simple and it should be there to support the many in our community. We certainly would not have had superannuation if those opposite had had their way at the time. This bill is very obviously based on Labor values, because it is making a positive difference to the real lives of ordinary Australians.

For many Australians superannuation will be the only substantial source of major savings for their retirement—apart from the family home, that is. As we are living longer after retirement it is vital that people are given clear and concise options about their retirement income. The superannuation industry was created by a government of vision, based on compulsory savings required by government. It is fair that this industry, which benefits so much from the compulsory savings system in Australia, gives back to the community with higher retirement savings through greater efficiency and lower fees.

From its introduction in the nineties, by another reforming Labor government looking after the interests of working Australians, superannuation has become a key pillar of our nation's retirement income system. Superannuation investment will grow and grow as more Australians make voluntary contributions for their future and compulsory contributions increase over the coming years, from nine per cent to 12 per cent. The importance of the superannuation system to the retirement income of everyday Australians means that there is a strong public interest in ensuring the system operates effectively to invest retirement savings with the ultimate goal of providing adequate benefits to members in their retirement.

Despite its importance, many Australians do not make choices about where their super goes. The fact of the current situation is that about 60 per cent of income earners are put into default accounts not tailored to individual needs or goals. I wonder at this time, when football fever is at a pitch, whether it is fair to make a comparison between the energy Australians invest every week in picking their winning teams for the footy comp and the engagement they have with superannuation. I am sure that they are both important in their own way, but the reality is that the dryness of some of the decisions that we make about how we invest our money seems to be very disengaging to very many Australians. I am also mindful that I have one of my local schools, Umina Public School, visiting this place today. I will be going to meet them at hospitality shortly after this to welcome them to the parliament. For them, certainly, ideas about superannuation are not the regular conversation of the playground, and understanding about what it could mean for their life in the future is quite limited. I will ask them whether they have considered anything in this area, because there are precocious young ones who might have an interest in it.

For many of us, retirement is a distant horizon that some dream about and others perhaps fear. But it is not something we seem to commit much time or thought to during our working lives, except for mid-afternoon daydreaming. For others, the reality is that the superannuation system is too complicated to deal with. People fear making the wrong decision without even knowing it, so default options are considered by many to be a safe alternative. The superannuation industry caters well for people who want flexibility and who know what they want and need out of their investment. Self-managed super funds provide ultimate freedom for those who want to take that extra risk, but what is lacking are clear and concise options so that people can figure out what they are getting when they sign up. I will take this opportunity, as I do on every occasion that I talk about self-managed super funds, to indicate that they are a very effective investment vehicle, but those who are in self-managed super funds should know that they are not protected against theft or fraud. The recent work of this parliament on the Trio collapse has made that very clear. It is a vital piece of public information that we need to make sure is understood widely in our community.

The introduction of MySuper products will improve the experience of those members who accept the default option, by placing them in a product that is appropriate and that ensures that their financial interests are protected. The MySuper provisions will lift the standards of super products available to all Australians and deliver on Labor's commitment to reduce the cost of living for working Australians. If you are going to have your money working for you in a superannuation scheme, you want the scheme to be a no-frills model if you are not going to engage with it. You want to get the best value for all that money you are putting in for your future. The licensee funds that will offer these products will have heightened obligations to act in the best financial interest of members. You would think that that would be common sense, but, sadly, we have seen cases where some providers have put their own interest ahead of the people on whose behalf they are making investments. It is a significant change that is being introduced by this Labor government. The licensee will also need to consider actively whether their MySuper product has access to sufficient scale to provide net returns that are in the best financial interest of members. Importantly, MySuper products will not allow commissions to be paid from a customer's investment. This is something that seems to be common sense when we say it out loud, but the reality is that, before this government undertook significant reform in this area, commissions were being paid to providers of financial services to direct people in particular ways, not always in the customer's best interest but, rather, in the interest of the financial provider. This legislation makes the changes necessary to ensure that does not occur.

MySuper products will also be beneficial for members who do not require additional services, just a no-frills variety. For people who say: 'I want my super and I want to know it is being looked after. I don't want to have to spend too much time on it,' the MySuper product is really going to be a fantastic transformation in the superannuation industry. MySuper will simplify and standardise the default superannuation product available to Australians, which will make comparisons much more manageable by having a much more definable and comparable set of super products. So instead of having to try to figure out all the fine print and compare apples and oranges and bananas, you will actually be able to have a look at MySuper 1, MySuper 2 and MySuper 3 and see what they offer and do a comparison against an established set of scales.

To bring simplicity and clarity to the super industry, MySuper products will be restricted in the types of and names of fees charged to accounts. So it will be easier for customers than it currently is to compare across funds and it will allow the industry to monitor returns in a way that communicates clearly to their customer base. The independent Cooper review found that fees in superannuation are currently too high—and I do not think any of the people in my seat of Robertson who have spoken to me would disagree with that; in fact, they are very keen to see this reform come through. There are situations currently where members may well be paying fees for services that they do not want and certainly have not requested. This is unfair for the majority of members, and it has taken this Labor government to implement these protections.

Every dollar that is taken in fees or other unnecessary costs is a dollar that does not make it into the pocket of the retiree. That is clearly where our focus is—looking after the ordinary, working Australians, too busy out there doing a hard day's work to come home and check their financial balances a day at a time. They need to be sure that the product that they have is simple and that they are getting really good value for that investment. Individuals can lose tens of thousands of dollars over their working lives, making being self-sufficient in retirement that much harder and reducing the time spend over a person's working life. Higher than necessary fees can total tens of thousands of dollars of lost retirement income. So this is not a small matter.

Australians should have confidence in the thought that, while they continue to work, their superannuation investment is under the care of fund managers and that, when they eventually begin drawing on their fund, fees and deductions have not left it barren. Those opposite, however, seem quite willing for this to continue. We must remember that they were the miserly voice in the public for some decades. They said year in and year out: 'Superannuation is too expensive. It'll send us broke. We can't afford it.' That is the same relentless negativity that we sadly see in so much of the debate in this place at the moment—a lack of vision for this country, a lack of willingness to do the hard work to set up structures that benefit the many in Australia rather than an entrenchment of privilege for the few.

Where do we stand now? We stand as one of the world's strongest economies. These are important reforms that will make a strong institution stronger. MySuper licensees will only be able to charge the following fees in relation to MySuper products. For people who are interested, these are the only things that they will be paying: an administration fee, an investment fee, a buy-sell spread, a switching fee, an exit fee and an activity fee. Super funds will be prohibited from charging any other types of fees in relation to MySuper products. This will prevent licensees from being able to deduct more exotic fees or unnecessary fees, which seem to have crept into the system, sometimes under such innocuous titles as 'entry fees'. By no means are these funds required to charge these fees for the MySuper products; however, if the decision is made, any of the fees charged must be one of the ones on the list above.

In addition, the Australian Prudential Regulation Authority will collect and publish data on MySuper products to ensure they are transparent and comparable. People will be able to go online and see the information and make comparisons at their own speed in their own time. The bill also requires MySuper products to meet minimum standards. These are that all customers will be able to access from their MySuper agency the same options and facilities and that the same processes are used when dealing with each customer's accounts. So everybody gets a go. There are not some who get a rolled gold version and others who are denied access. They should be able to get the same access. These standards will ensure that those Australians for whom a default super account is sufficient will receive adequate information and protection of their funds.

All superannuation guarantee contributions made by employers on behalf of employees that do not have a chosen fund and have not elected in writing to the RSE licensee to have their contributions made to a specified choice product will be paid into a MySuper product. This bill will have minimal impact on the obligations of employers' contributions. It is expected that most major superannuation providers will be licensed to offer MySuper products and most employers will still be able to utilise preferred funds already in use for super guarantee contributions. New employers, and employers making contributions to a fund that does not offer a MySuper product, will have to select a default fund that does offer a MySuper product. To make this process easier on the employer, it is intended that APRA will publish on its website a list of all funds that are authorised to offer a MySuper product.

While licences will not be issued to funds with fewer than five members, employers that pay contributions for more than 500 employees will be able to receive dispensation to tailor MySuper where it is viable to offer a distinct product to suit the particular needs of the workplace. These products will also be available to direct relatives of employees of large employers.

The government has been advocating for a number of years the benefits of making voluntary contributions to one's super­annuation. Under these changes, no contribution limitation can be imposed on MySuper products. Contributions must be accepted to a MySuper product, whether they are made by an employer or the member directly. The kinds of contributions that may be made by or on behalf of members include, but are not limited to, superannuation guarantee contributions, salary sacrifice contributions, after-tax contributions and spouse contributions.

In summary, this legislation is key Labor legislation. It expresses our belief in the right of all working Australians to a dignified retirement which will be funded from superannuation. This legislation will exert downward pressure on the fees and charges paid by ordinary members in superannuation accounts that are on too many occasions far too high and inexplicable. This piece of legislation will have the effect of ensuring that, when people reach retirement, there will be more money in their accounts than there otherwise would have been if this bill had not been presented to the House. It is a Labor bill in the Labor tradition. We established superannuation and we continue to make it better and more accessible for ordinary working Australians. I commend this bill most heartily to the House.