Paul Fletcher (Bradfield, Liberal Party) Share this | Hansard source

by leave—The report which has just been tabled deals with the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011 and the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012. The coalition has significant concerns with both of these bills.

Firstly, the MySuper core provisions bill has some very serious implementation issues. Secondly, the bill is defective in its failure to open up the default fund system to competition. And, thirdly, the bill is defective in allowing a charge to be made for the provision of intrafund advice—that is to say, the bill is defective in relation to the arrangements under which intrafund advice may be provided, which allow the cost of that advice to be recovered across all members of the superannuation fund. This is inconsistent with a key principle underlying the Future of Financial Advice reforms, which are simultaneously going through the parliament, that financial advisers are not permitted to provide advice without charging for that advice in a transparent manner.

In relation to the trustee obligations and prudential standards bill, the coalition's view is that, while a broad sweep of reforms was recommended by the Cooper review, which underpins this set of bills, the bill deals, somewhat surprisingly, with only a selected area of those reforms. The provisions of the bill which impose additional obligations and liabilities on directors are, in our view, ill-judged and go too far, and the so-called scale test is very much opposed by the coalition. Rather than addressing all of these areas in the brief time I have available today, I wanted to focus briefly on the relationship between the introduction of MySuper products and the arrangements in relation to default superannuation funds. This is an area of significant concern to the coalition. A key aspect of the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011 is that only MySuper products may be used by employers in making default superannuation contributions for employees who have not specifically chosen a fund. The wording of proposed section 29K(4), which is about the objects of that particular part of the bill, is clear:

… employers will need to pay contributions for an employee who has no chosen fund into a fund that offers a My Super product.

The difficulty is that there is inadequate choice of MySuper products for employers to pay that contribution into.

The Cooper review recommended, firstly, that the Superannuation Guarantee Act should be amended so only a MySuper product would be eligible to be a default fund nominated by an employer and, secondly, that all MySuper products should be able to be nominated for default fund purposes in awards approved by Fair Work Australia. In other words, the policy principle identified in the Cooper review, and a policy principle which on this side of the House we support, is that the only requirement for eligibility to be a default fund is simply that you have an approved MySuper product. Unfortunately, the legislative framework which will result from the bill, should it pass into law, together with existing law is that an additional necessary condition must be satisfied before a MySuper product is eligible to receive contributions in respect of a particular employee from an employer. That additional necessary condition is that the relevant superannuation fund has been approved by Fair Work Australia as a default fund—under the secretive and non-transparent process which Fair Work Australia uses.

The member for Robertson spoke of comments made by the Financial Services Council. I would like to refer to another observation made by the Financial Services Council. They had this to say:

This unnecessarily restrictive regulatory framework has a negative impact on the ability of employers to administer their compulsory superannuation obligations …

The council also said:

It also restricts competition, efficiency and innovation in the financial services industry.

The failure to include a provision in this legislation that any MySuper fund is eligible to compete in the marketplace—that any MySuper fund is eligible to be the default fund chosen by any employer—is a lamentable omission. It appears to the coalition to be inconsistent with the policy principles underlying the Cooper review.

I regret to say that the government's failure to make provision for this appears to be part of an ongoing pattern of the government using superannuation policy to bolster and benefit the union movement. Successive Labor governments have seen considerable attraction in using the compulsory superannuation system to increase the power, influence and financial position of the union movement and its key personnel. The minister with responsibility for this package of bills is a natural candidate to advance such an agenda. He is a former secretary of the Australian Workers Union and a former director of the predecessor organisation to the largest industry superannuation fund, AustralianSuper.

Under the Fair Work Act, as I have mentioned, the so-called modern awards are required to contain a clause specifying the superannuation fund into which the employer must pay the employee's superannuation contributions if the employee has not separately nominated a fund. It stands to reason that to be nominated as a default fund under a modern award is a very valuable right because a default fund is guaranteed a steady stream of contributions. This is highly relevant to the content of the bills discussed in the report which has just been tabled, because of the point that I have just made—a failure to amend the law to ensure that the only necessary requirement to be nominated as a default fund, applicable to any employer-employee relationship, is to be a MySuper fund. An analysis conducted last year by the Institute of Public Affairs found that, across 166 modern awards approved by Fair Work Australia, there were a total of 566 superannuation funds specified. Of these, 513 were industry or public sector funds.

Decisions about the superannuation system—

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