Thursday, 4 April 2019
Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017; Second Reading
I rise to speak in support of this bill. The Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2019 includes eight changes to superannuation governance arrangements, including transparency measures, new powers for APRA to regulate superannuation licensees, and new penalties for directors. As the shadow minister has just outlined, Labor was successful in moving some amendments to this bill in the Senate which improved the operation of the bill and, most importantly, extend its coverage. Those amendments were drafted by the shadow minister, importantly in consultation with the industry. We listened to the feedback that we'd got from people who work within this industry about the shortcomings of this bill and we moved to rectify those. In doing so, we've been able to improve the coverage of the bill.
In terms of the government's amendments requiring registrable superannuation entity licensees to look through pooled superannuation trusts to meet their obligations to make information about their portfolio holdings publicly available, that's a reform that Labor certainly supports and that will improve transparency and governance of super funds, and clarifying that the obligations on RSE licensees apply equally in respect of all choice products and MySuper products is of course something that Labor supports and wants included in this reform.
The issues that Labor has been concerned about predominantly relate to ensuring that choice products that contain multiple investment options are required to disclose portfolio holdings. This is because the disclosure requirements only extended to investment options held or issued by the RSE or related entities, so retail funds which offer their investment options via custodial arrangements may not have met the requirements. Labor, in consultation with the industry, raised these concerns that the changes didn't apply to choice products and were largely exempting around 83 per cent of bank-owned and other retail superannuation assets, and Labor's amendments have ensured that the annual MySuper outcomes assessment gives priority to net return to members, that provisions of the bill cover choice products as well as MySuper products, that APRA is given the same powers in granting and cancelling an RSE licence as it will have for MySuper authority, that APRA's direction powers extend to connected entities, and that it's clear in the bill that the portfolio holdings disclosure requirements cover choice products with multiple investment options.
Unfortunately, the government's original amendments basically implied that bad member outcomes were confined to MySuper products. We all know that's not the case. Regular surveys and assessments of the performance of funds across the industry, retail and self-managed sectors indicate that some of the best-performing funds, in terms of not only the investment outcomes for members but also the transparency associated with fees and charges, are delivered by industry funds, and many of those are MySuper products. Our amendments force choice superannuation funds to report their performance, like those MySuper products do.
We all know, unfortunately, that millions of Australians are being ripped off by underperforming accounts. It's critical that they are forced to report their performance and lift their game. We've seen, not only through the banking royal commission but also through the recent Productivity Commission report, just what a difference an underperforming account can make to a member's balance when they retire. The shadow minister pointed out earlier that, if someone, through no fault of their own, is defaulted into a badly performing fund, as compared to a high-performing fund, the difference at the end of their working life can literally be close to millions of dollars. When most people enter into the superannuation regime, they're defaulted into a particular product, because—let's face it—they're not aware of how the superannuation system operates. When you're talking about teenagers and people in their early 20s, they don't have the financial literacy to understand how the system works, and a lot of the time they start in a particular occupation and are defaulted into a particular fund.
It's important to ensure, when that does occur, that those that are in that situation can have trust in the operation of that fund—that the trustees are operating in the best interests of their members and ultimately trying to maximise the performance of the fund. Labor's technical amendments will significantly strengthen that outcomes test. We need to see penalties for dodgy directors increased to more than $500,000 to make the penalties effective but also to ensure that they're retrospective to October 2015. Labor will also seek to strengthen APRA's directions power and increase super funds' portfolio-holding obligations.
We all know that Labor built the superannuation system—it's something that we're very, very proud of—and we're always working and consulting with the industry to improve it. Where sensible amendments are offered by the government we will seek to support them, but in this case we've also been able to improve the regime and the amendments that have been put forward by the government. The financial services royal commission demonstrated that there needs to be much more scrutiny, much more accountability and much more transparency when it comes to the provision of financial services in this country. That not only applies to the advice industry, it not only applies to the insurance industry or the banking industry—particularly in areas associated with mortgages and loans—but it also applies to superannuation. Progress in improving transparency, accountability and better outcomes, including in superannuation, is something that Labor wholeheartedly supports.
There are serious issues in superannuation that still need to be dealt with. The government have had six years to try and deal with some of those issues and they've abjectly failed. The notion that people can have unpaid superannuation in this day and age is simply criminal and it amounts to wages theft. Given the technical nature of payments platforms for people and the fact that everyone in the workforce has a tax file number, we should be able to make sure that, if someone is working in a particular industry, in a particular occupation, they are paid superannuation in accordance with the legislation and on time, yet it's not the case. It's something that this government have been woefully inadequate in dealing with.
The superannuation gender pay gap is a serious issue that still results in a major disadvantage, predominantly for women in Australia, as a result of them taking breaks from the workforce. It's an issue on which Labor has sought the advice of experts who work in this industry and is acting on it. If Labor is elected, we will seek to rectify the gender pay gap that exists in superannuation in this country through reforms such as ensuring that superannuation continues to be paid when someone goes onto paid parental leave or dad and partner pay. Underperforming funds are a serious issue. We know the outcomes of underperforming funds for people during their life cycle can be rather detrimental and put people at a severe disadvantage compared to those in more superior-performing funds. This reform goes some of the way, but there will be more work to do, and Labor stands ready to do that work if we're elected at the next election.
Labor are very proud that we forced this government into agreeing to a royal commission, despite the fact that they voted against it 26 times and despite the fact that they did not want to shine a light on what's been going on in financial services and banking in this country over the last decade. Labor are extremely proud that we were able to achieve that outcome and force this government into a royal commission. Labor have been vindicated. The findings of that royal commission and the shocking evidence that was given through that process vindicated Labor's call for a royal commission. Labor have stood ready to implement the recommendations from that royal commission as quickly as possible. We even offered for the parliament to sit an additional two weeks in March this year to ensure that we had the time to implement the more urgent recommendations that related to issues like grandfathered commissions, which have been the root cause of a lot of the problems in this industry. Unfortunately, the government again delayed, obfuscated and wouldn't deal with the issue. It perfectly highlights their approach to financial services, to superannuation, to advice and to what's been going on in banking and financial services over the course of the last decade, and it's a great shame. If Labor is elected at the next election we will make sure that we as quickly as possible get on with the job of implementing those royal commission recommendations through our implementation taskforce, in consultation with the industry, to improve the regulation that exists in this area and, importantly, to improve outcomes for people in financial services in this country, including superannuation.