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Thursday, 14 February 2019
Page: 10342

Senator GRIFF (South Australia) (18:48): As my colleague Senator Patrick stated previously, Centre Alliance is very happy to support the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018, but we are disappointed that the government has taken such a very long time to progress it. The 'protecting your superannuation package' bill does what its name says: it essentially protects low-balance super accounts from being eroded by excessive fees and insurance. The main beneficiaries will, of course, be young people, who, due to often having multiple jobs in their early working lives, usually end up with multiple low-balance super accounts. This bill preserves the balance of idle accounts so that they cannot be cannibalised by excessive fees and insurance once the balance falls to $6,000. Fees will be capped at no more than three per cent of the account balance, with is very much a welcome move.

The bill also requires super accounts with low balances to be transferred to the ATO if the account has been inactive for more than 13 months. This is a very important change, because it means that money accumulated in lost super accounts, lining the pockets of no-one except the super fund providers, can be consolidated into a single active member account. I also very much support the measures in this bill which restrict the application of automatic life insurance on inactive accounts, accounts with balances below $6,000, or those of young people under the age of 25, though the government's amendment will make an exception for those in dangerous occupations, and we do support that.

Workers should be empowered to make their own financial decisions, and their employer or super provider should provide them with relevant information so that their decision is the right one and one that lines their pockets not the super fund's. Not only will this bill assist today's workers but it will also assist every young person who enters the workforce in the future. To put things into perspective, the average job tenure for those under 25 is one year and eight months. This means that someone who may have started flipping burgers at McDonald's at age 14 could very well have worked as many as six different jobs before they reach the age of 25.

The beneficiaries of these reforms will be the workers. The losers will be the greedy super funds, particularly smaller funds, which rely on this member rip-off to keep themselves afloat. By levying fees on these lost and forgotten accounts, fund managers are raking in millions. They are earning more than $587 million a year from accounts holding less than $6,000 and a staggering $405 million a year from those with a balance less than a somewhat paltry $1,000. That's around $1 billion all up. The problem is they are not only eroding returns but they are also eating into their members' capital.

The issue of multiple super accounts or zombie accounts was highlighted in the banking royal commission's final report, which included a recommendation that a person should only have one default super account and that machinery should be developed for stapling a person to a single default account. As of June 2016, 40 per cent of members held multiple accounts. That is a staggering number. More than 25 million super accounts are held by only 15 million people and, what's more, more than half were inactive or held less than $6,000. Australia's largest super fund, AustralianSuper has a staggering 470,000 inactive accounts, and recently announced a 50 per cent increase to its administration fees to take effect later this year, which effectively slugs members an extra $39 a year. That will add an easy $55 million to its bottom line—nice money if you can get it, but at the expense of those who deserve better fiduciary care.

We need to stop members' nest eggs from being poached by profiteering. Some funds may fail to survive without the drip feed they get from whittling down hard-earned retirement savings, but I don't think the industry would be any poorer should this happen. Super should help Australians achieve greater financial independence while reducing the burden upon taxpayers to fund the aged pension, not the opposite. This legislation must be passed to ensure we protect hardworking children, men and women with low super balances, as well as future generations, from a higher tax burden.