Explanatory Memorandum
(Circulated by the authority of the Minister for Employment and Workplace Relations and Minister for Financial Services and Superannuation, the Hon Bill Shorten MP)General outline and financial impact
Stronger Super
On 16 December 2010, the Assistant Treasurer and Minister for Financial Services and Superannuation, the Hon Bill Shorten MP, announced the Stronger Super reforms.
Stronger Super represents the Government's response to the review of the governance, efficiency, structure and operation of Australia's superannuation system, the Super System Review. The Government released the Super System Review's final report on 5 July 2010.
To provide input on the design and implementation of the Stronger Super reforms, the Government undertook extensive consultations with industry, employer and consumer groups. The Government announced its decisions on the key design aspects of the Stronger Super reforms on 21 September 2011 (Minister's Media Release No. 131 of 21 September 2011).
This Bill is the third tranche of legislation implementing the Government's MySuper and governance reforms as part of Stronger Super. The first tranche of legislation was introduced to the Parliament on 3 November 2011 as the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011 (the MySuper Core Provisions Bill). The second tranche of legislation, the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Act 2012 (the Trustee Obligations and Prudential Standards Act) received Royal Assent on 8 September 2012.
This Bill introduces the next stage of the reforms. The Bill:
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- bans entry fees and sets criteria for the charging of other fees in superannuation, including rules for the charging of financial advice;
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- requires all superannuation funds to provide life and TPD insurance to members (excluding defined benefit members) on an opt-out basis;
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- enables APRA to collect information on a look-through basis;
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- requires the disclosure and publication of key information in relation to superannuation funds;
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- allows only funds that offer a MySuper product and exempt public sector superannuation schemes to be eligible as default funds in modern awards and enterprise agreements;
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- allows exceptions from MySuper for members of defined benefit funds;
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- requires trustees to transfer certain existing balances of members to MySuper; and
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- provides rules in relation to ERFs.
Date of effect: The majority of these provisions will apply from no earlier than the commencement of the MySuper Core Provisions Bill or the Trustee Obligations and Prudential Standards Act. This ensures that appropriate provisions of this Bill commence at the same time as provisions of the first two tranches of legislation.
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- Schedule 1, relating to fees, costs and intrafund advice, generally commences immediately after the commencement of the MySuper Core Provisions Bill (being 1 January 2013 or an earlier date set by Proclamation);
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- Schedule 2, relating to insurance, generally commences on 1 July 2013;
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- Schedule 3, relating to collection and disclosure of information, generally commences the day after the Bill receives Royal Assent;
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- Schedule 4, relating to modern awards and enterprise agreements, generally commences the day after the Bill receives Royal Assent;
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- Schedule 5, relating to defined benefit members, generally commences immediately after the commencement of the MySuper Core Provisions Bill (being 1 January 2013 or an earlier date set by Proclamation);
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- Schedule 6, relating to the transition to MySuper, generally commences immediately after the commencement of the MySuper Core Provisions Bill (being 1 January 2013 or an earlier date set by Proclamation);
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- Schedule 7, relating to eligible rollover funds, generally commences on 1 July 2013; and
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- Schedule 8, relating to other amendments, generally commences immediately after the commencement of the MySuper Core Provisions Bill.
Proposal announced: On 16 December 2010, the Minister announced the Stronger Super reforms. On 21 September 2011, the Minister announced the Government's decisions on the key design aspects of the Stronger Super reforms.
Financial impact: This Bill has no significant financial impact on Commonwealth expenditure or revenue.
Summary of regulation impact statement
Regulation impact on business
Impact: The regulation impact statement (RIS) for Stronger Super implementation can be found at http://ris.finance.gov.au. The relevant sections of the RIS covered in this Bill are the transfer of accrued default balances, types of insurance offered through superannuation and sections 2 and 3 of the appendix. A RIS exemption was granted for the remainder of the Stronger Super reforms, which will be subject to a post-implementation review.
Measures to be contained in subsequent tranches of legislation
The MySuper and governance reforms will be implemented in several tranches of legislation. This is the third tranche.
Further reforms will be contained in a subsequent tranche of legislation, including:
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- additional governance measures relating to service providers, voting, fines, reasons for decisions and access to the Superannuation Complaints Tribunal; and
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- consequential changes to the SIS Act, the Corporations Act and the First Home Saver Accounts Act 2008 .