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Thursday, 22 November 2012
Page: 9599

Senator THISTLETHWAITE (New South Wales) (19:51): I support the passage of the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2012. There are many economic legacies of the Hawke and Keating governments, but probably the most significant economic legacy in terms of advantages and changes to the lives of ordinary Australians is in the form of compulsory superannuation. We now have a $1.3 trillion investment fund—a pool of savings that not only businesses and investors but also workers, employees and their families can rely on to grow our economy to provide security and safety in retirement.

Congratulations to Paul Keating for his foresight as Treasurer in establishing our superannuation system. The bill before the Senate today builds on that great legacy and tradition of providing strong superannuation legislation in this country and it delivers on the government's 2010 election commitment to introduce a new, simple and low-cost default superannuation product for employees, MySuper. It is a key part of this government's Stronger Super reform package. Other reforms also include processes to make everyday transactions to the super system easier, cheaper and faster through the SuperStream package of measures, improving the governance and integrity of the superannuation system and improving the integrity of and increasing community confidence in the self-managed superannuation fund sector.

Stronger Super also complements the government's historic commitment to increase the superannuation guarantee from nine to 12 per cent. MySuper will provide a simple, cost-effective default product that all Australians can rely on. MySuper will be limited to a common set of features that make it easier for members, employers and other stakeholders to compare the performance of funds across the MySuper product range. Ultimately, that will place downward pressure on fees and will promote engagement and a greater understanding of superannuation in our economy.

This bill amends the Superannuation Guarantee (Administration) Act 1992 and the Superannuation Industry (Supervision) Act 1993 to establish the core framework for MySuper products. MySuper products will replace existing default investment options in default funds, from 1 July 2013. MySuper products will have a simple set of product features, irrespective of who provides them.

Therefore, the bill requires APRA to be satisfied that a MySuper product has some core characteristics. These characteristics are: a single, diversified investment strategy, which can be a life cycle investment approach; equal access to services for all members; the same processes are used in allocating investment returns to members; no limits are placed on the contributions that a trustee of a MySuper product will accept; and a member cannot be transferred out of the MySuper product unless the member consents or if it is required by Commonwealth law.

A trustee will also have to demonstrate that they are able to meet new obligations to act in the best financial interests of the members of the MySuper product. These obligations are outlined in other tranches of legislation that have been before this parliament.

The bill also establishes the authorisation regime for MySuper. Trustees will be required to be authorised by APRA for each MySuper product they wish to offer. APRA will be able to accept applications for MySuper products from 1 January 2013. I note that a number of funds are beginning to establish MySuper style products and to promote them in the marketplace. Any trustee will be able to apply to offer a MySuper product except trustees of eligible roll-over funds, self-managed superannuation funds and APRA-regulated funds with fewer than five members.

APRA will generally only authorise a trustee to offer a single MySuper product in a superannuation fund. However, trustees will also be able to offer employers who contribute to the fund for more than 500 employees a separate MySuper product tailored to the needs of that particular workplace. These products will be able to differ from a fund's main MySuper product in terms of investment strategy, member services and fees. These MySuper products must be separately authorised by APRA.

Minister Shorten has acknowledged that some stakeholders have raised concerns in relation to the process for authorisation of MySuper products for large employers. It has been suggested that there should be no separate upfront APRA authorisation of tailored large employer MySuper products. However, upfront authorisation will provide certainty for employers and their employees that the product will not be disallowed by APRA after it has been put in place and already started to receive contributions. If a MySuper product was allowed to commence before it was authorised and then disallowed by APRA this would be very disruptive, causing the employer to have to find another default fund at very short notice and causing the superannuation of employees to have to be moved to a different superannuation fund.

APRA has started to draft guidance material that, where a trustee has already been authorised to offer a main MySuper product, the authorisation of subsequent tailored MySuper products will only need to focus on key differences between the tailored product and the already authorised MySuper product. As such, where there are few differences in a tailored MySuper product, the authorisation process is expected to be quicker and require significantly less effort by a trustee. The government considers that this approach strikes the right balance between certainty for employers and employees and a smooth and functional application process for trustees.

Minister Shorten has asked Treasury to conduct a review of the authorisation process within two years of the commencement of the MySuper regime and this review will assess the efficiency of the authorisation process, including any impacts on commercial tender processes. The review will also specifically examine the time taken by APRA to assess and decide applications for authorisation of tailored MySuper products.

From 1 January 2014, it will be mandatory for all employers to make contributions to a fund that offers a MySuper product for any employee who has not chosen a fund. This will provide employers six months to ensure that they are able to select a default fund that offers a MySuper product to comply with the superannuation guarantee obligations.

MySuper products will be restricted to charging fees that are described in the same way so that they can be directly compared. APRA will collect and publish data on all MySuper products to ensure that this information is freely available. Members of a MySuper product will also be generally charged a single fee structure. This will enable members, employers and market analysts to make comparisons based on the actual fees paid by the member in each MySuper product. In addition, requiring the same fees to be charged to all members will place a competitive pressure on trustees to offer the best possible fees to all of their members.

However, a trustee will be able to charge a lower administration fee to employees of certain employers reflecting administration efficiencies for the fund in dealing with that employer. Further, APRA will be able to authorise MySuper products with different investment fees within a lifecycle investment strategy if it is satisfied that certain conditions are met. Those conditions are: that the investment fee charged to each member of an age cohort is the same; that there is a maximum of four age cohorts and therefore no more than four investment fees; and that the investment fees for the age cohorts reflect their fair and reasonable attribution to the investment costs of the fund between the age cohorts. This will ensure that members invested in assets with lower investment costs do not cross-subsidise members invested in assets with higher investment costs because they are in different stages of the lifecycle.

I conclude by making some comments about the points raised by Senator Cormann regarding default funds and their listing within modern awards. The fact is that these reforms do not affect choice of superannuation fund legislation. Employees maintain the discretion to choose which fund they wish to have their superannuation contributions made to. That means when they go to the employer they receive an employment declaration and their choice of superannuation fund form.

The opposition has an issue with industry superannuation funds because—and this is really the crux of the matter—most employees choose to remain in industry funds because the fees are lower, commissions are lower and the performance is greater. That is a product of the system that has been established by a Labor government, a system that the opposition wishes to try to tear down. It has never got over the fact that it never appreciated the significance of superannuation and never initially supported its establishment and cannot get over the fact that superannuation funds that are run by unions, with trustees on those boards, in cooperation with employer associations perform better than most corporate funds.

On that basis, this is a worthy reform in the great tradition of Labor delivering better superannuation and better retirement savings for our economy. I comment the bill to the Senate.