Second Reading SpeechMr Shorten (Minister for Financial Services and Superannuation and Minister for Employment and Workplace Relations)
That this bill be now read a second time.
The Superannuation Legislation Amendment (Service Providers and Other Governance Measures) Bill 2012 represents the final, the last tranche of legislation implementing the MySuper and governance elements of the government's Stronger Super reforms.
Stronger Super is the government's response to the Review into the Governance, Efficiency, Structure and Operation of Australia's Superannuation System-also known as the Cooper review.
Together with other tranches of the legislation already introduced, this bill continues the Gillard government's commitment to enhancing the governance and integrity of Australia's superannuation system.
The bill amends the Superannuation Industry (Supervision) Act 1993, the Corporations Act 2001, the Superannuation (Resolution of Complaints) Act 1993 and the First Home Saver Accounts Act 2008.
This bill implements a key recommendation of the Cooper review, to which I referred earlier, to override any provisions in a fund's governing rules that stipulate that the trustee must use specified service providers or only invest in or through specified entities.
Where provisions like this are in a fund's governing rules, superannuation fund trustees are prevented from selecting other service providers, other insurance companies or other investment vehicles, even where it would be in the best interests of fund members to do so.
A recent report by APRA found that situations where a trust deed required trustees to use a related insurance provider resulted in higher-cost insurance products provided to members-higher-cost products.
The bill will ensure that a trustee is obliged to enter into arrangements which are in the best interests of the members.
The bill also implements the Cooper review recommendation to give APRA the power to impose infringement notices as an alternative to criminal prosecution. This will allow APRA to impose a more appropriate and flexible range of penalties for minor breaches of the SIS Act.
The bill will improve individuals' rights in relation to access to reasons for decisions from trustees. Currently, when members and beneficiaries make complaints to trustees, trustees are not required to provide reasons for their decisions. This bill remedies this and ensures that people have a right to obtain information from trustees in relation to decisions that affect them.
Requiring trustees to provide reasons for decisions in relation to death benefit complaints is particularly important given the statistics from the Superannuation Complaints Tribunal annual report for 2011-12, which showed that death benefit complaints account for almost one-third of all written complaints received by the tribunal each year.
The bill also provides more time for members and beneficiaries to lodge complaints with the tribunal in respect of total and permanent disability claims. The increased time to lodge complaints aligns the treatment as closely as possible with the courts and the Financial Ombudsman Service.
Another Cooper review recommendation being implemented by this bill is enhanced requirements for entities that are responsible for both superannuation funds and managed schemes-so-called dual-regulated entities.
Currently, these entities only have to meet resource and risk management requirements, administered by APRA, that are focused on the entity's superannuation business. This left a regulatory gap in respect of the entity's non-superannuation business.
This bill will close this gap and these entities will need to also meet resource and risk management requirements administered by ASIC. These requirements seek to protect the interests of investors in non-superannuation schemes they manage.
Following feedback from industry, these new requirements will commence a year later, from 1 July 2015. APRA and ASIC will work together and with industry on how the respective resource requirements will apply in practice.
The bill also addresses concerns that have been raised about the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Act 2012 in relation to director liability.
This bill inserts a requirement for persons seeking to take legal action against a director for a breach of their duties to first seek leave from court.
The bill also extends the availability of a defence for directors and trustees if their breach was due to reasonable mistake. The defence will now cover breaches of MySuper duties.
In response to concerns raised in consultation, a further change is being made to the defences in relation to investment and management of reserves. The changes will clarify that each defence is available where a trustee or a director can establish compliance with all of the covenants and MySuper obligations that are relevant to the particular loss or damage suffered.
These changes have been developed in consultation with industry and will better balance the rights of superannuation fund members and the protection of directors and trustees against frivolous or vexatious litigation.
The bill also makes consequential amendments to ensure the effective operation of the first three tranches of MySuper and governance legislation. In particular, the amendments recognise that various provisions in the existing legislation will in future be dealt with in APRA's prudential standards.
Full details of the amendments are contained in the explanatory memorandum.
I commend the bill to the House.