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Labor launches part two of retirement incomes policy 'Superannuation: a safer system'\n\n



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LEADER OF THE OPPOSITION

JOINT STATEMENT BY THE LEADER OF THE OPPOSITION THE HON SIMON CREAN MP SHADOW MINISTER FOR RETIREMENT INCOMES NICK SHERRY MP

LABOR LAUNCHES PART TWO OF RETIREMENT INCOMES POLICY Superannuation: A Safer System

Labor today announced a number of proposals that will safeguard the savings of ordinary Australians.

Labor Leader Simon Crean and Shadow Minister for Retirement Incomes Senator Nick Sherry jointly released the second chapter of Labor’s Retirement Incomes Policy, Superannuation: A Safer System, at an Australian Institute of Superannuation Trustees lunch in Melbourne today.

The main proposals include:

• Full compensation for losses in the event of theft and fraud, and business failure; • Clear, simple and comparable disclosure of all fees, charges and commissions; • Tough regulation of some fees and commissions with

o entry and exit fees prohibited; o commissions banned and/or restricted on compulsory 9% superannuation guarantee contributions; o a system of flat fees for advice; • Member “salary sacrifice” contributions to be paid to funds quarterly along

with superannuation guarantee contributions; • The banning of inducements by a financial provider to employers to attract employee superannuation contributions; • Increased powers and/or resources to regulators APRA, ASIC, the Tax Office

and the Superannuation Complaints Tribunal; • Improved regulation of superannuation fund trustees; and • Improved consumer protection to reduce poor financial planning advice.

Security in retirement is fundamental to the future of all Australians. However many are deeply concerned about theft and fraud, losses due to business failure, excessive fees, charges and commissions, and misleading financial advice.

Superannuation is a compulsory long-term investment for retirement. It needs to be regulated in order to improve the safety of Australians’ superannuation savings.

Consumers also need to be protected from the excessive fees currently in our system.

Labor policies will ensure both a safer and a lower cost system.

. Copies of chapter two of the policy can be found shortly on the ALP website www.alp.org au or by emailing rosie.irvine@aph.gov.au.

Contact: Senator Nick Sherry 0418 482 807 or Rosie Irvine 02 6277 3127 or 0414 692 283

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Compensation for losses

• Full 100% compensation in the event of theft and fraud

• Compensation provisions to be extended to include negligence by trustees, post-retirement annuities and pensions, and unpaid 9% superannuation guarantee contributions when a business fails.

Superannuation losses in these circumstances have a catastrophic impact on the individuals who are hurt. In a compulsory superannuation system losses should be fully covered.

Fees, charges and commissions

• Clear, simple and comparable disclosure of all fees in both percentage and dollar terms. Labor endorses the model released at the ASFA conference based on Chant West research.

Disclosure in itself is not sufficient to protect the 9% compulsory superannuation guarantee (SG)

A 1% total fee reduces final savings by 22% over 40 years, a 2% fee by almost 40%.

• Entry and exist fees that act as a barrier to consolidation will be banned.

• Commissions on the 9% compulsory superannuation guarantee will be prohibited where an individual alone joins any fund. In circumstances where individuals as a group join a fund they will be allowed subject to relevant and strict criteria.

Commissions and their significant impact are not clearly understood. They prejudice advice, create a major conflict of interest and are consequently anti-competitive.

• A flat fee for relevant advice by a fund or planner to be debited against the compulsory 9% superannuation guarantee will be encouraged.

Fee regulation by government exists in areas such as higher education, health and aged care where significant public monies are provided. Superannuation is no different.

• All fees and commissions to be reported to the regulator APRA.

Protecting members

• All superannuation contributions including “salary sacrifice” contributions to be paid quarterly and included on employees’ pay slips.

• Inducements paid to encourage employers to favour a particular fund to be prohibited.

• The no-disadvantage test for employees to be extended to superannuation provisions in industrial relations instruments.

• Death and disability insurance costs to be regulated.

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Strengthening the Regulators

• The regulators APRA, ASIC, the Tax Office and the Superannuation Complaints Tribunal to receive adequate resources.

• The secrecy provisions that prevent the Tax Office reporting back to a fund member about a complaint will be modified.

Consumer complaints

• A “one-stop” shop for consumer complaints.

• The Superannuation Complaints Tribunal powers to be extended.

• Consumer organisations to be encouraged to continue research and monitoring.

Financial planning

• Education standards to be upgraded.

• Regular monitoring of financial planners through “shadow shopping”.

• Clear definition of an “independent’’ planner.

Funds Changes to the management of superannuation funds will include:

• universal licensing.

• minimum education for trustees.

• online access for members of all large and medium funds.

• increasing the member protection regime threshold from $1000 to $1500.