Tuesday, 11 February 2020
Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019; Second Reading
I rise to speak on the Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019. As my friend the member for Whitlam and shadow minister for financial services has indicated, Labor has agreed to support the bill in this House but to reserve our final position until after this issue is fully examined in the Senate. I support the amendment moved by the member for Whitlam.
This bill has a single schedule, providing that employees under workplace determinations or enterprise agreements have the right to choose their superannuation fund. The bill amends the Superannuation Guarantee (Administration) Act 1992 to ensure employees under workplace determinations or enterprise agreements have the right to choose their superannuation fund. This applies only to new workplace determinations and enterprise agreements made on or after 1 July 2020. Of course, over time all agreements would be covered by this new requirement as those agreements and determinations are renewed. The default arrangements which apply if an employee does not choose a fund remain unchanged.
Some employees are covered by enterprise agreements or workplace determinations that do not allow choice of which super fund their compulsory super contributions are paid into. In a submission to the previous Senate inquiry on the bill, Industry Super Australia indicated that, of those employees covered by enterprise agreements, only 7.4 per cent have no choice of superannuation fund, which represents just 1.9 per cent of the workforce. Labor is not against choice. For example, we appreciate that employees changing jobs may want to retain their current superannuation arrangements rather than have to start afresh in a super fund mandated by an enterprise agreement. That can lead to workers having multiple accounts and paying multiple lots of fees and insurance premiums.
However, choice can be a vexed issue and has varying results in different circumstances. For example, in the absence of the legislated but not enacted super choice product dashboards, many consumers may not have the information available to them to make informed choices that are in their best interests. I note that Industry Super Australia has highlighted that choice is attractive but has the potential for greater consumer harm if it is not accompanied by strong consumer protections and enforcement. Their support for this bill is conditional on the implementation of the legislated choice product dashboard.
I have to say that choice can be exercised in several ways. It isn't just about individuals making a choice. Choice can also be exercised where workers collectively vote to endorse or mandate a particular fund for a workplace or company in an enterprise agreement. Why is it that collective choice is not as valid as an individual choice? Collective choice is also a particularly valid form of choice in industries like transport and construction, where workers frequently move between employers or across locations. Having a commonality of fund can assist those workers as well as employers by easing administrative burdens and ensuring better compliance.
In the university sector, there is another complexity. University staff can choose their current scheme or elect to join UniSuper as the fund mandated in the National Tertiary Education Union's enterprise agreements. Some 400,000 university staff have chosen UniSuper. Members can then, within UniSuper, choose either a defined benefit or an accumulation option. The defined benefit scheme, which is the choice of 80 per cent of employees, needs certainty about the number of staff that will take up that option in order to survive. It is not guaranteed by employers or the government. It is a scheme that allows academics and other staff to move seamlessly between universities across Australia and remain in one scheme. The defined benefit scheme would be jeopardised if this legislation passes.
There is another issue. Many organisations say that any enterprise agreements that pay above the SGC should be exempted from this legislation. For example, the universities pay 17.5 per cent. The mandated funds which are mandated in enterprise agreements are almost always industry superannuation funds. While industry funds have varied performance levels—and these go up and down—one thing you can be sure of is that industry funds are well managed and well governed. They are subject to enormous levels of compliance. Within most industry funds, there are a range of investment options, including direct ownership of shares to suit the risk appetite of each member. So there is enormous choice within each fund already. Now is not the time for a chapter and verse comparison of the returns of industry funds versus retail funds. However, I would refer to the minister's statement in the second reading speech in which he said:
And most of all, we want the settings that underpin the system to be focused exclusively on the interests of members—on maximising their retirement savings from the first contribution and throughout their working life.
However, in reality, this choice legislation doesn't actually realise that admirable ambition. The McKell Institute, said in its submission to the inquiry of the Senate Economics Legislation Committee that after examining the breadth of mandated funds:
Overall, we found the fewer the restrictions or limitations placed on individual choice, either by employees or by employers, the worse the overall performance outcomes were for employees. Of the six main cohorts identified, employees under agreements with 'collective choice' or 'group choice' were the most likely to be placed in high-performing funds and almost the least-likely to be placed into under-performing funds.
Call me cynical, but the choice argument can be seen as a mechanism to give the retail funds, which are generally poorer performing, an opportunity to undermine the industry funds in those remaining areas where funds are mandated. With more money to burn on glitzy advertising, there is a good chance that those without good information will make a poor choice. Even worse, there is a whole industry out there selling self-managed superannuation and charging high fees in the process. Worse still, in some industries, the removal of mandated funds means that the fund the worker ends up in will be the choice of the employer, not the employee. This means employers will simply railroad employees into a super fund choice that is consistent with their interests rather than the interests of the employee.
We know that, in some instances, it is a case of, 'If you want the job, this is the fund that you're in.' I know that the ACTU and unions fear that, if this legislation goes through, the next point of attack by the antisuper warriors within the coalition will be mandated default super schemes. Nominated default schemes in cases where the employee doesn't nominate a fund within 28 days are exempt from this legislation. However, it isn't hard to see this bill as the thin edge of the wedge. We know through enterprise bargaining that some employers already want to change the default fund to one that suits them, not the employees. We also know that this government loathes industry funds. They have never got over the fact that industry funds are there to benefit the members and don't charge the high fees that retail funds do.
The coalition also hates the fact that trade unions are equal partners with employers in governing those funds. It's a fact that, over a working lifetime, industry funds perform better than retail funds. The average annual net rate of return for retail funds is 6.37 per cent over five years and 6.11 per cent over 10 years to September 2019. For industry funds, that average annual net return is 8.42 per cent over five years and 8.3 per cent over 10 years. That is a massive difference of two per cent a year, on average, and equates to tens of thousands of dollars over the long term.
On this side of the chamber we're proud of the industry superannuation system in this country, set up in 1984 by workers sacrificing wage increases for superannuation. Soon after, trade unions invited employees to join them on the boards of new industry funds. Labor then legislated the super guarantee in 1990 and, by and large, it has been one of the great postwar social and economic reforms. Increasing super contributions from three per cent to nine per cent by 2002, our national savings of $3 trillion is almost among the highest per capita in the world, and our potential investment pool is massive. But for Labor, it would simply not be here. And remember, it was opposed by those opposite at every step of the way.
Industry super has given the 60 per cent of workers who had no super in the mid-1980s access to decent retirement savings outside the pension. It also gave the other 40 per cent who did have super a real choice, rather than being trapped in substandard company schemes. But over the last six years this coalition government has refused to do the big things that would have improved super and retirement incomes for everyone. In 2014, they put a freeze on the super guarantee at 9.5 per cent. Nationally, that has meant a loss of around $14.2 billion for 8.7 million workers, by not increasing the super to 12 per cent by 2020 as per the original schedule.
Now there is a debate within the coalition about whether we should increase the SGC to 12 per cent at all. The delayed increase from 9.5 per cent to 12 per cent from 2021 to 2025 is now under threat, despite the denials of the government. Whether that increase to the SGC goes ahead will be an acid test for this government. Further, this government has done nothing about the theft of superannuation by employers. In fact, under separate legislation, they are giving them an amnesty, a pat on the back, and saying: 'Well done. Keep the proceeds of your crime.'
In Australia it is estimated that 2.85 million workers have been underpaid superannuation, costing them $5.94 billion collectively. In my seat of Corangamite alone, around 18,000 workers or 31 per cent of the workforce have been underpaid around $34.2 million. That's almost $1,900 per worker. The government could fix this tomorrow by extending the safety net for unpaid super entitlements, introducing stronger monitoring and enforcement and actually prosecuting employers. Of course, this isn't a priority for this government.
Then there is the shameful proposition coming from one Liberal backbencher and other coalition supporters to exempt people who earn under $50,000 from having super paid and to take their 9.5 per cent SGC as wages. In my electorate, that potentially means 28,000 workers would be exempt. Collectively, they would lose $98.8 million in super and pay an extra $28.4 million in tax. Worst of all, their ultimate retirement incomes would be slashed. Rather than dealing with these big picture issues, rather than giving workers a hand up, rather than protecting workers' super and making sure everyone can access a decent retirement, all this government wants to do is fiddle with and even white-ant the super system. All they want to do is break down the universality of the system to exempt workers from it and undermine the industry funds. Like most things they touch, this government is a wrecker, not a builder. It was Labor that built superannuation. It was Labor that built Medicare and the NDIS. It was Labor that built paid parental leave. Labor builds; the coalition destroys.
This legislation is another example of the ideological fixation that this coalition government has against workers choosing their fund collectively under an enterprise agreement. It is another example of the ideological use of choice to undermine industry funds and promote the interests of the retail funds. On the other side of the coin, they provide no accompanying consumer protections and no guaranteed right to accessible information. Deputy Speaker, you can hear in my speech that while we support this legislation going through the House it is simply to ensure it gets to the other place where it can be examined more robustly.