Bill Shorten (Maribyrnong, Australian Labor Party, Minister for Financial Services and Superannuation) Share this | Hansard source

I would like to thank all the members who have participated in this debate. In particular, the contribution by the member for Newcastle captures a lot of what this bill is all about. This bill delivers on the government's 2012 election commitment to introduce a new simple low-cost default superannuation product called MySuper. It represents yet another step forward in improving the efficiency, competition, transparency and governance arrangements of the superannuation industry and, most importantly, improving the chance that people will have more money to retire on than they currently do.

However, MySuper is just one part of the government's comprehensive agenda to make superannuation simpler, fairer and more efficient, therefore delivering that very important goal of better retirement incomes. This includes making the process of everyday transactions in the superannuation system easier, cheaper and faster through SuperStream; reforms to improve the governance and integrity of the superannuation system; and removal of commissions through the Future of Financial Advice reforms recently passed by this parliament into law.

MySuper will provide a default superannuation product that all Australians can rely upon. It 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 a very important downward pressure on fees. Funds will be able to begin offering MySuper products from 1 July 2013. From 1 January 2014 it will be mandatory for employers to make contributions to a fund that offers a MySuper product for any employee who has not chosen a fund for themselves.

MySuper will also ensure that trustees exercise a higher level of care and an even greater responsibility for their default members. However, MySuper is not just for those who choose not to take an active interest in superannuation. MySuper products will set a new benchmark for transparency and comparability of key performance information on fees, costs and returns. Therefore, MySuper is designed to be an attractive option for members seeking to choose a simple, commission-free and cost-efficient superannuation product. Trustees will be required to be authorised by APRA for each MySuper product they wish to offer. APRA will be able to accept applications for authorisation of MySuper products from 1 January 2013.

Today the government will move two amendments to this bill to ensure that there is a smooth transition to MySuper products. Firstly, the amendments defer the date when employers must make contributions to a fund that offers a MySuper product from 1 October 2013 to 1 January 2014. While funds will still be able to offer MySuper products from 1 July 2013, the amendment will provide an additional three-month transition before it becomes mandatory for relevant contributions to be made to a MySuper product. This will provide more time for funds and employers to prepare for MySuper, facilitating a smoother transition to the new order. Secondly, the amendments respond to stakeholder concerns by allowing trustees that operate a life-cycle investment strategy for their MySuper product to charge more than one investment fee. APRA will authorise MySuper products with different investment fees within a life-cycle investment strategy if it is satisfied that certain criteria are met. One condition is that the investment fee charged to each member of an age cohort is the same. There is a maximum of four age cohorts and therefore no more than four investment fees and the investment fees for the age cohorts reflect a fair and reasonable attribution of the investment costs of the fund between the age cohorts. This will ensure that members invested in assets with lower investment costs do not cross-subsidise members invested in assets with higher investment costs because they are in different stages of the life cycle.

I acknowledge that some stakeholders have raised concerns in relation to the process for authorisation of MySuper products for large employers. It has been suggested that there should be no separate upfront APRA authorisation of tailored large-employer MySuper products. However, up-front authorisation will provide certainty for employers and their employees that the product will not be disallowed by APRA after it has been put in place and already receiving contributions. If a MySuper product was allowed to commence before it was authorised and then disallowed by APRA, this would be very disruptive, causing the employer to find another default fund at short notice and causing the superannuation of employees to be moved to a different superannuation fund. Recognising that tailored MySuper products will often be based on a fund's main MySuper product, APRA has stated in draft guidance material that, where a trustee has already been authorised to offer a main MySuper product, the authorisation of subsequent tailored MySuper products will only need to focus on key differences from the fund's main MySuper product. Some funds were concerned about this. Let me reassure them that where there are few differences in a tailored MySuper product the authorisation process is expected to be quicker and require significantly less effort by a trustee.

The government believes that this approach strikes the right balance between certainty for employers and employees and a smooth and functional application process for trustees. However, I have asked the Treasury to conduct a review of the authorisation process within two years of the commencement of the MySuper regime. This review will assess the efficiency of the authorisation process, including any impacts on commercial tender processes. The review will also specifically examine the time taken by APRA to assess and decide applications for authorisation of tailored MySuper products.

I would like to acknowledge the very constructive approach of industry in providing feedback on the reforms. As the member for Newcastle presciently observed, by 2050 almost one in four Australians will have reached retirement age, compared with one in seven today. In combination, our government's superannuation reforms are estimated to increase retirement superannuation balances by almost $150,000 for a 30-year-old worker earning average full-time wages. MySuper will benefit the estimated 80 per cent of working Australians who are currently in the default investment option of a default fund. Clearly, this is a reform that will bring long lasting benefits to a large cross-section of the Australian community, and I commend the bill to the House.

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