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Monday, 19 October 2015
Page: 11640


Mr THISTLETHWAITE (Kingsford Smith) (20:13): Quite simply, the effect of the Superannuation Legislation Amendment (Trustee Governance) Bill 2015 and the coalition government's approach to superannuation retirement incomes is that Australians will save less for their retirement. That is the crux of the matter of this bill and the suite of other reforms that have been introduced by the Abbott-Turnbull governments to ensure that the incentives for Australians to save more for their retirement are removed, and the effect will be that they will have less in their superannuation accounts than they otherwise would have under a Labor government. Quite simply, this is dumb policy. In an environment where there are big questions about Australia's fiscal sustainability, and an environment where we have an ageing population putting more pressure on our aged-care services and more pressure on the age pension budget, to be cutting back on the amount that we are encouraging Australians to save for their retirements is simply dumb politics, and it represents this government's obsession with their ideological views being put before the interests of Australians and the Australian economy. It completely demonstrates how out of touch the Abbott-Turnbull government is.

In 2013, the Financial Services Council did the most comprehensive study and qualitative analysis of Australians' views of superannuation. It was the largest survey that has been conducted of Australians about their views of our superannuation system. The results are quite interesting. They show that a whopping 83 per cent of Australians support an increase in compulsory superannuation contributions from nine to 12 per cent. Of course, this was Labor's plan when we were in government. Labor developed a plan to ensure that Australians save more and that we take pressure off the age pension, off the aged-care system, by encouraging Australians to save more by increasing the compulsory level of superannuation contributions from nine to 12 per cent. It was a staged increase; it was not an immediate increase. It would have been completed by 2020.

What was this government's approach to that very positive policy that would have resulted in Australians having more money in their superannuation balances by 2020? The Abbott and Turnbull governments and those opposite all voted to stop that scheme going ahead. They voted to halt the increase in superannuation from nine to 12 per cent. They say they have put it on hold, but, to the Australians out there who may be listening or watching: that is complete garbage. If you think that the government is going to increase superannuation from nine to 12 per cent at any time into the future, you have rocks in your head. The government have form on those sorts of issues. Which was the last Australian government that also put a halt to compulsory superannuation contribution increases? That would be the Howard government. They encouraged Australians to save less and the Abbott-Turnbull government took up the cudgels when they came to office, once again demonstrating how out of touch they are.

The most common type of fund that Australians support and place most of their superannuation contributions into is an industry fund—a super fund that is managed cooperatively by workers and employers. The Financial Services Council survey demonstrated that 59 per cent of Australians have their superannuation savings invested in an industry fund. Why is that? Why would most Australians have their superannuation in an industry fund? There is one simple answer to that question: they are the best performing funds. They are also the ones with the lowest fees and are managed cooperatively by people who understand their circumstances—most notably fellow workers and employers from that particular industry or that particular business. They have served our economy and workers well. The result of the encouragement of industry funds in Australia has resulted in $2 trillion being invested in Australia's superannuation system, the fourth-largest pool throughout the world of investment saving funds. For workers who may lack particular expertise in managing retirement incomes and managing investment funds, it has provided access to the best quality advice at very reasonable cost. That has proved very effective for the management of workers' retirement incomes, but it is also very effective for Australia's economy because, as I said, it has built up a very large pool of investment funds, which of course can be used, subject to trustee obligations under particular funds, as a source of investment funds for other projects throughout the country—most notably infrastructure, which is productivity-enhancing and ensures that our economy is growing. We know that industry funds are the best performing funds, we know that they are the cheapest and we know that most Australians have their retirement savings in an industry fund.

What did the mob over there do when industry funds performed so well? What did the Abbott-Turnbull government do? They introduced legislation such as this that seeks to tear that system down. They seek to meddle in the management of the most successful and best performing funds and the cheapest sector in the superannuation industry. That is the subject of this bill. That is why they are doing what they are doing with this bill. They are changing the governance of the most successful sector of the superannuation industry. Under this bill, registered superannuation entities must have a minimum of one-third independent directors and an independent chair on their board. That is something that the coalition has been pushing for many years. It is an ideological push that could harm the performance of superannuation funds and affect the retirement incomes of thousands and thousands of Australian workers. It represents, once again, the Abbott-Turnbull government putting their ideological interests ahead of the interests of Australian workers and, indeed, ahead of the interests of the health and growth of the Australian economy.

The question that needs to be asked is: why is this needed? Why has the government come up with this reform? Why is this needed when industry funds are the best performing? Why is this needed when industry funds have the lowest fees? Why is this needed when industry funds have the best returns? Recently, independent expert advice proved that, in terms of returns for members and investors, industry funds returned on average 10.2 per cent growth compared to retail funds of 9.6 per cent growth. They are also some of the safest funds in the world when it comes to the management of members' funds. There is no justification whatsoever for these reforms. At the heart of this is an ideological obsession with the fact that the coalition have never been comfortable with the notion of workers managing their own retirement incomes. They have had an ideological bent against it from the moment Paul Keating established the compulsory superannuation system in this country. It is sad and it demonstrates how out of touch the government really are. In many respects it just shows that this bill is unnecessary, because in 2013 the then Labor government introduced new governance obligations for industry superannuation funds. Those obligations require all funds, using an independent third party, to regularly evaluate the effectiveness of their board and directors, to manage and disclose conflicts of interest, to ensure all directors are fit, proper and capable of making decisions expected of them, and to regularly review their board renewal processes. APRA, the industry watchdog has robust enforcement powers and has admitted that these reforms that were introduced by Labor in 2013 are yet to be bedded down. They are still in the process of putting these reforms into action.

So there is no justification for these reforms. This bill represents a heavy-handed intervention and a 'one size fits all' approach, regardless of the superannuation fund's business model and the circumstances of its membership. It does not exactly fit with the traditional Liberal philosophy of not intervening in a market, particularly in a market where the funds that are being invested are performing very well and getting great returns for the members, and are safe.

The bill also ignores some of the major issues that exist in Australia with respect to funds management. I can recall as a senator in the past sitting on Senate committees that looked into the collapse of investment funds in Australia—investment funds such as Trio Capital, Opes Prime and others—where many workers who established their own self-managed super funds on the advice of so-called independent financial advisers lost all of their savings, with no recourse at all for any compensation or actions that recovered that lost capital, because they were outside of the industry superannuation fund system and they did not have the protection of the Superannuation Industry (Supervision) Act.

Those self-managed super funds and that poor financial advice resulted in thousands of Australians losing their retirement income. I can recall going to Wollongong and taking evidence from many of the people who lost much of their retirement savings in Trio Capital. Many of these people had worked in the coal mines or steel mills around Wollongong for their whole life and were just at the end of their working life. They received advice from so-called independent financial advisers to re-mortgage their homes so that they could invest in these schemes. So, not only did they lose their retirement savings but they lost their kids' inheritance as well. Once again, there was no recompense because they were outside of the system.

This was an issue Labor was well aware of when we were in government. That is why we instituted the Future of Financial Advice reforms. It was to tackle some of these problems of poor advice to vulnerable people. Again, what was the response of the Abbott/Turnbull government? When they came to government they sought to water down the Future of Financial Advice reforms, particularly the 'best interests' rule for ensuring that financial advisers were acting in the best interests of their clients.

That is a real issue that is still ongoing in Australia. One would think that if the coalition government were in touch they would look at it. But, once again, they have ignored it. We have had these big scandals in a number of the big banks throughout Australia in respect of their wealth management practices and the advice that has been given to individuals through their banking and finance advice services. Again, the government has ignored many of the recommendations of some of the inquiries into these issues, and instead has sought to attack the best-performing and safest aspect of the wealth management and retirement incomes investment advice system.

Finally, I want to deal with the issue of the gender gap. At the moment the average superannuation payout an Australian woman will receive when they retire is $112,600. The average for a man is $198,000. There is a massive difference in Australia at the moment in the retirement incomes of men and women. In Australia, 35 per cent of women have no superannuation at all. Furthermore, 55 per cent of women will retire with less than $25,000 in their superannuation fund.

So, what does this Liberal government do when it comes to looking at this issue of the gender imbalance in retirement savings in this country? They seek to legislate to make the problem worse. They seek to get rid of the policies that were meant to address this issue, in the low-income superannuation contribution. Low-income earners have a disincentive to save. It is built into the taxation system. The taxation system ensures that if you are a low-income worker—someone typically on less than $38,000—you will pay more tax on your superannuation that you will, effectively, on your marginal rate for earnings. That is a disincentive to working people. So, Labor introduced an effective tax credit to ensure the disincentive was removed. This government has scrapped that tax credit: they have gotten rid of the low-income superannuation contribution.

Effectively, what they have done is put a tax increase on three and a half million of the lowest paid workers in the country, two million of whom are women. So what we are going to see is women and low-income workers save less for their retirement, putting more pressure on the budget in the future and more pressure on the aged care system. It is dumb politics and that is why this bill must be opposed.