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Tuesday, 22 May 2012
Page: 5082

Ms GRIERSON (Newcastle) (20:12): I rise to speak in support of the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012. This bill introduces additional powers for the Australian Prudential Regulation Authority, APRA, to create prudential standards. It amends the Superannuation Industry (Supervision) Act 1993 in order to expand the duties for registrable superannuation entity licensees. It applies new trustee duties to RSE licensees who offer a MySuper product and applies duties to the directors of corporate trustees.

The additional powers provided to APRA will enable the authority to make prudential standards in superannuation which will improve the clarity and certainty of prudential regulation by providing further detail on the prudential matters as set out in the enabling legislation. This is consistent with APRA's current ability to make prudential standards in the finance industries and is a sensible application of their experience to a different industry sector—the superannuation industry.

The new prudential standards can apply to an APRA-regulated superannuation fund, connected entities, specified classes of super funds or any individual fund or connected entity. 'APRA has successfully established prudential standards in banking and insurance for many years,' the authority's Ross Jones said on 28 September 2011, 'and the establishment of such standards in superannuation will provide clear benefits to the superannuation industry as a whole and to its members.' I agree. This legislation is about extending peace of mind to all Australians and ensuring the responsible management of their superannuation funds, which they will reply upon in their retirement.

The ability to make prudential standards will give APRA greater flexibility to essentially adapt to industry developments as they happen and give the authority the ability to provide regulated entities with clearer and more suitable legal requirements, tailored to their unique needs. This industry is far too complex in nature for a one-size-fits-all approach. Current regulations governing the superannuation industry are certainly not flexible enough. They are unable to be amended in a prompt manner in order to respond to the various changes that occur within the industry.

The diversity within the superannuation industry and the varying character and size of entities demonstrates the need for flexibility, which is what we are introducing with this bill. As disallowable legislative instruments, prudential standards must adhere to the Legislative Instruments Act 2003. This would include suitable and appropriate superannuation industry stakeholder consultation, ensuring that there is a degree of transparency and adequate process when it comes to making any changes.

This bill will also require that trustees who elect to offer a MySuper product meet the new stringent obligations to support and ensure that the financial interests of its members are put first. This is a common-sense and fair approach. It is the same approach that we adopted in the financial advice legislation, which is soon to be debated in the House. Trustees will have increased responsibilities for default members, the members who more often than not delegate majority of the responsibility for their superannuation through the trustees. Furthermore, under this legislation APRA must also be satisfied that a trustee will comply with new enhanced obligations and that individual directors comply with the enhanced obligations when authorising an RSE licensee to offer a MySuper product.

The duties required of fund trustees will be expanded to: give priority, first and foremost, to the interests of beneficiaries where any conflicts arise; develop strategies for insurance and risk; and require trustees to give regard to valuation information, potential and expected tax consequences, and costs in investment strategies. These measures are all designed to ensure that responsible, informed decisions are made and that fund boards are managed in an effective and accountable way. Our government is committed to protecting the money that hardworking Australians have accumulated over their working lives and providing certainty for them in retirement.

Under this legislation, the duties required of individual directors will be further clarified and separately identified. Directors must act honestly, exercise appropriate care and management of funds, and give priority to the interests of beneficiaries. While this all seems a common-sense and rational approach, best practice within the industry is not always evident. These reforms are necessary reforms. Certainty is required. As a federal Labor government, we strive for the betterment and protection of working Australians and their families, and this legislation is about ensuring that their entitlements—their superannuation—is looked after well.

As with the vast majority of bills that this federal Labor government has put forward, this bill is about fairness and protecting working Australians. It was a federal Labor government that first introduced compulsory superannuation savings in 1992, and it is again a Labor government that is building upon that legacy. We are committed to strengthening superannuation through the minerals rent resource tax legislation, which has now passed through the Senate to fund our historic increase to the superannuation guarantee, from nine to 12 per cent, a change that will benefit 8.4 million employees across Australia. According to BT Financial Group, within 10 years, Australia's superannuation pool will double from $1.4 trillion to $2.8 trillion. This is too significant an amount of national savings to take a half-measured approach when it comes to industry regulation.

As Minister Shorten has highlighted, for the majority of Australians superannuation is their second greatest source of wealth after their home. However, all too often Australian families do not know all that much about the people they have entrusted with this considerable asset. Australians should not have this unnecessary burden—this uncertainty—hanging over their heads throughout their working lives. They should be assured that governance across the superannuation industry is of an adequate standard with quality assurance measures in place. They should be assured that money they have earned through fair and honest work in their lifetime, saved away and growing for their retirement, is being looked after adequately in a prudent and responsible manner.

As good governments like ours know, it is always important to keep up with developments in industries and to initiate appropriate reforms. It is necessary that governments review operations within key areas such as the superannuation industry. The Stronger Super package represents our Labor government's response to the review into the governance, efficiency, structure and operation of Australia's superannuation system—the Cooper review —which was first handed to the government in 2010. As the review found, standards of governance have not managed to keep pace with developments within the superannuation industry. Among several key findings in the Cooper review was the finding that trustees and directors of trustee boards had difficulty in understanding the nature of their roles and the expectations placed upon them. The review also highlighted the rate at which conflicts of interest could arise due to the consolidation of the superannuation industry. For these reasons, it is important that we keep governance measures up to scratch and assist with the modernisation of this important industry, protecting national wealth and securing Australians' retirement.

The Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012 follows and builds upon the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2012, introduced in November 2011. It is the second component of legislative reform that our government is introducing to implement our MySuper and governance reforms as part of Labor's Stronger Super package. These were first announced by Minister Shorten, the Minister for Financial Services and Superannuation, and I am very pleased to witness the ongoing work towards delivering these reforms. I note that there are two members in the House who have very much been part of audits and audit committee work with the Taxation Office, where we saw too many times that standards were not being upheld and that peoples' savings were at risk. Extensive industry, employer and consumer consultation have informed the development of these improvements. This is best practice and our government is to be commended for its engagement with industry stakeholders. With these reforms designed to achieve the protection of and assistance to the growth of member superannuation entitlements, who could actually say 'no' to greater returns or greater security for working Australians in their retirement?

In my electorate of Newcastle, there are over 15,627 lost superannuation accounts worth $60 million waiting to be found. Of course, that data is now available for the whole country—and it is staggering. Along with many of my colleagues, I have done all that I can to inform constituents of the Australian Taxation Office's SuperSeeker website, to help them find and reclaim their lost super. But this figure is just one small indication that there remains the need for continued reform in superannuation. There is a need for people to be informed about the decisions they make in regard to their superannuation, and certainly there is a requirement for the people who manage superannuation funds to keep communicating with their members.

Labor's commitment to reforming and modernising the industry aims to assist with these important tasks. I look forward to the government building on these superannuation reforms, with subsequent tranches of legislation due in the near future. These will include reforms to arrange the transition of member accounts from existing default superannuation products to MySuper products, prohibit the deduction of commissions from MySuper member accounts, introduce new rules for the payment of performance based fees by RSE licensees to investment managers relating to the assets of a MySuper product, introduce rules for the fair and reasonable allocation of costs between MySuper products and each choice product within a super fund, create additional governance measures relating to selective service providers, enhance data collection and data publication powers for APRA and create new disclosure requirements in relation to MySuper and choice products.

Our government's agenda when it comes to superannuation is clear. As the minister has highlighted previously, superannuation assets in Australia are expected to reach $6.2 trillion by 2036. We are protecting the retirement savings of working Australians and their families. We are ensuring that their funds are managed responsibly and managed fairly. Our Labor government is strengthening superannuation with these many reforms, and I would say that many of these reforms have come from the work of some wonderful committees of this parliament. I congratulate all the backbenchers who work very tirelessly on committees to bring about reforms and hope that governments will respond to their recommendations. Of course, that is exactly what has happened in this case. We are also lifting compulsory super from nine to 12 per cent through the minerals resource rent tax. Historically and contemporarily, we are the party that stands for stronger super. A multitrillion-dollar industry is far too significant to be taken lightly. Stronger super is what our government is committed to delivering and I therefore commend this bill to the House.