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Monday, 19 March 2012
Page: 3276

Ms O'NEILL (Robertson) (16:06): On behalf of the Parliamentary Joint Committee on Corporations and Financial Services I present the committee's report into the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011 and the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012, incorporating a dissenting report.

In accordance with standing order 39(f) the report was made a parliamentary paper.

Ms O'NEILL: by leave—On 3 November 2011 the House of Representatives referred the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011 to the committee for inquiry and report. The committee received 18 submissions into the provisions of this bill and held a public hearing on 2 March 2012 in Canberra. On 29 February 2012, the Senate referred the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012 to the committee. While the committee had limited time to consider this bill, it did call for and receive 11 submissions. The committee also offered those witnesses who gave evidence at the public hearing on 2 March the opportunity to comment on the provisions of the trustees bill and, in the report that I table today, the key issue of trustee obligations in proposed section 29VN of the bill is discussed in some detail. The committee thanks all those who made submissions and gave verbal evidence to the committee.

The MySuper core provisions bill and the trustee obligations and prudential standards bill are part of the Australian government's Stronger Super reform package announced in December 2010.

The MySuper core provisions bill would amend the Superannuation Guarantee (Administration) Act 1992 and the Superannuation Industry (Supervision) Act 1993 to introduce a new regulatory framework for default superannuation products. As the Minister for Financial Services and Superannuation has stated:

… around 60 per cent of Australians do not make active choices in relation to their superannuation.

…   …   …

Having created an industry which flourishes on the back of compulsory savings mandated by legislation, it is fair that this industry, which benefits so much from the compulsory saving system in Australia, contributes to higher retirement savings through greater efficiency and lower fees.

The minister added:

MySuper will provide a simple, cost-effective default product that all Australians can rely upon.

I can inform the House that submitters to this inquiry supported the introduction of simple, comparable and cost-effective default superannuation products, as envisioned by the MySuper reforms. The Australian Chamber of Commerce and Industry argued that the reforms are required to give appropriate recognition to consumer behaviour. It stated in its submission:

ACCI supports the MySuper goals of reducing account costs, making costs more transparent, improving the basis for inter-fund comparison, and providing improved member protection. ACCI recognises that many employees are not well positioned to be actively engaged in making investment decisions, and an appropriate superannuation system must recognise this.

The Financial Services Council told the committee that the reforms will enhance transparency and consumer protection within Australia's superannuation sector. To quote the Financial Services Council:

For the first time, it effectively says that when you have a compulsory savings system in this country we believe there ought to be some protections or some provisions around where those compulsory moneys flow.

The Industry Super Network strongly advocates the reforms, arguing:

… it is entirely appropriate to reassess the regulatory framework, particularly for superannuation providers who wish to offer default funds in workplaces where members do not exercise a choice of fund.

The Financial Planning Association of Australia noted in its evidence that it:

… supports the intention to have 'comparable' characteristics based on cost, investment performance and the level of insurance coverage.

The committee considers that the introduction of a cost-effective, simple and comparable default superannuation scheme is compatible with the objective of promoting a market in which consumers can confidently invest. The evidence provided to this committee and explored by the super system review panel points to a need for reform. A system cannot be in the best interests of its members or facilitate informed participation if it does not effectively respond to members' engagement with that system.

The evidence before the committee also highlights the alarmingly low levels of consumer financial literacy regarding Australia's superannuation system. The committee would welcome greater efforts to improve members' understanding of an investment that is of significant financial importance. The committee may raise this matter with the Australian Securities and Investments Commission (ASIC) as part of the committee's ongoing oversight of ASIC. The committee would also be interested in advice in this area from the Financial Literacy Board regarding the board's activities in this area.

I commend the report to the House and I thank the committee secretariat for their assistance.