Second Reading SpeechMr Shorten (Minister for Financial Services and Superannuation and Minister for Employment and Workplace Relations)
The Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill 2012 is the third tranche of legislation implementing the Government's MySuper and governance reforms as part of Stronger Super.
This Bill amends the Superannuation Industry (Supervision) Act 1993, the Superannuation Guarantee Administration Act 1992 the Corporations Act 2001 and the Fair Work Act 2009 to implement the remaining measures relating to MySuper, as well as introduce data collection and publication powers for APRA and disclosure requirements for trustees that were announced as part of Stronger Super.
MySuper is a key part of the Government's Stronger Super reform package. Stronger Super also includes reforms to:
- make the process of everyday transactions in the super system easier, cheaper and faster through the SuperStream package of measures;
- improve the governance and integrity of the superannuation system;
- improve integrity and increase community confidence in the self-managed superannuation fund sector.
MySuper will provide a simple, cost-effective default product that all Australians can rely on.
MySuper will be limited to a common set of features to make it easier for members, employers and other stakeholders to compare performance across MySuper products, placing downward pressure on fees.
The Bill comprises seven schedules.
Schedule 1 has new fee rules for superannuation funds that mean conflicted remuneration, such as commissions, cannot be charged in relation to MySuper products, that ban entry fees and limit exit fees, switching fees and buy/sell spreads to cost recovery in all superannuation funds and imposes parameters that must complied with when a trustee agrees to a performance-based fee with an investment manager in relation to a MySuper product.
These rules ensure that members of MySuper products do not pay unnecessary fees, that a trustee does not enter into performance fee arrangements that are not in the member's best members and limits certain fees to ensure that they do not unfairly inhibit a member from making active choices.
Schedule 2 covers the insurance arrangements for MySuper products. Trustees will be required to provide members of a MySuper product with life and TPD insurance on an opt-out basis.
This provides an important safety net to members in MySuper that may not actively consider their insurance needs.
Schedule 3 implements new data collection and publication powers for APRA in relation to superannuation and imposes new disclosure obligations on trustees including publishing their full portfolio holdings and a product dashboard on their website.
Transparency of key performance information is crucial to a competitive and efficient superannuation system. For this reason, APRA will have new data collection and publication powers in relation to superannuation.
Members are entitled to information about their investments, therefore, superannuation funds will be required to disclose their full portfolio holdings and a product dashboard to provide key information to members at a glance.
The Government will consider broadening this requirement to other managed investments as part of its response to the parliamentary inquiry into the Trio collapse.
Schedule 4 makes consequential amendments to the Fair Work Act to ensure that only a fund that offers a MySuper product may be nominated in a modern Award or enterprise agreement.
This will ensure that employees that have their contributions directed to a fund nominated in a modern award or an enterprise agreement will benefit from having their contributions placed in a MySuper product if they do not wish to choose another superannuation product.
Schedule 5 exempts defined benefit funds and defined benefit arrangements from the requirements of the MySuper regime. This will allow defined benefit funds to continue to be used as a default fund by employers.
Defined benefit members are entitled to benefits that are not altered by the charging of fees or the investment strategy adopted. Therefore, the MySuper regime is not designed to apply to defined benefit arrangements.
Schedule 6 requires trustees of superannuation funds to transfer the accrued default amounts of members to a MySuper product by 1 July 2017.
Moving existing balances to MySuper will ensure that members are able to obtain the benefits of MySuper, in particular a ban on commissions, for their existing superannuation balance as well as for future contributions.
I am aware that there are some concerns with the definition of the amounts that must be transferred to MySuper.
However, the Government's approach is consistent with the recommendations of the Cooper Review and will allow many funds to simply convert their existing default investment options to a MySuper product.
Treasury estimate that the definition in the Bill could result in $90 billion more being moved to MySuper than the approach suggested by stakeholders. Based on the assumptions of the Cooper review, this translates to approximately $100 million per annum in fees being saved.
Further, all members will be notified before a transfer occurs and will have the right to opt-out of the transfer. Therefore, no member is forced to transfer their balance to MySuper if they do not want to. Trustees will have up to four years to communicate with members about their options.
Schedule 7 introduces new authorisation requirements for eligible rollover funds. This will ensure that APRA is able to assess that eligible rollover funds are meeting their intended objective of reconnecting members with their lost superannuation and are promoting the financial interests of members.
Full details of the Bill are contained in the explanatory memorandum.