Gai Brodtmann (Canberra, Australian Labor Party) Share this | Link to this | Hansard source

Superannuation has changed the way many people save for their retirement. It is easy in our younger years not to think far into the future and make decisions that will have an impact when our working lives come to an end. Retirement is a distant prospect, and for many young people it is just not on the radar. It is a great fear of mine that we do not give enough consideration to these matters—that we do not plan for our futures or take the time to plan for a comfortable retirement.

As the member for Canberra, going out to community forums and going out into mobile offices and spending time out in the community, I often meet with people, particularly women, who unfortunately have not had the opportunity to save much for their retirement. Many of them are renting houses and struggling on the pension, and it makes it really difficult for them to make ends meet. They tell me of their plight and wish they had had a greater understanding of superannuation and put more aside for their retirement.

This is where the great power of compulsory superannuation can come in. It provides a significant source of savings, untouched and continuing to grow until such time as we need it. Planning for the future and ensuring that we make adequate provisions to support our chosen lifestyle is a message I am very keen to promote. And as Australia's population ages and more baby boomers reach retirement age, it is vital that the government looks at the way superannuation is operating and finds ways of improving the long-term outcomes for Australians.

The Superannuation Legislation Amendment (MySuper Core Provisions) Bill is another example of Labor's commitment to ensuring we have a fair, regulated superannuation industry in Australia—a superannuation industry that Australians can have faith in as they work hard to save for retirement.

I really want to send this message to young Australians today: think about your retirement now.

As I have said in this place on previous occasions, superannuation is a Labor policy through and through. It was a Labor government that first introduced the compulsory superannuation guarantee, and it is a Labor government that is now reforming super to ensure the retirement savings of Australian workers are better protected.

The Gillard Labor government is committed to strengthening super, and we are doing this through a historic increase in the superannuation guarantee from nine to 12 per cent, funded by the Minerals Resources Rent Tax. Around 8.4 million Australians will benefit from the increase in this superannuation guarantee. For example, a 30-year-old on full-time average weekly earnings will now be around $108,000 better off at retirement. We are also working to make sure superannuation concessions are fairer for up to 3.5 million low-income earners. Overall, our historic super reforms will lift retirement savings by $85 billion over 10 years and $500 billion by 2035.

The bill we are debating today, the Superannuation Legislation Amendment (MySuper Core Provisions) Bill, implements the core framework for MySuper products. MySuper products are simple, cost-effective products that will replace existing default investment options in default funds. Superannuation funds will be able to offer MySuper products from 1 July 2013. To this end, the bill amends the Superannuation Guarantee (Administration) Act 1992 and the Superannuation Industry (Supervision) Act 1993.

The bill establishes the framework for registrable superannuation entity, RSE, licensees to be authorised by the Australian Prudential Regulation Authority, APRA, to offer a MySuper product. Trustees that obtain authorisation to offer a MySuper product may offer it from 1 July 2013. However, for employees who do not have a chosen fund, employers are required from 1 October 2013 to make contributions to a fund that offers a MySuper product. This provides a three-month transitional period from when MySuper products may be offered to the date at which it becomes mandatory for employers to make contributions for employees who do not have a chosen fund to a fund that offers a MySuper product. The bill also generally requires that each member who holds a MySuper product must be charged the same fees.

The bill also sets out the requirements for authorisation of MySuper products by APRA that must be met by trustees of superannuation funds that wish to offer a MySuper product, as well as the key characteristics of the MySuper products and the permitted fees and associated fee-charging rules for the products.

This is good policy. It is in the national interest to encourage Australians to save more for their retirement. MySuper will be a low-cost default superannuation product and it will improve the simplicity, transparency and comparability of default superannuation products. MySuper will benefit workers because it will have a number of features designed solely with the interests of members in mind.

I am pleased to be able to speak on this bill today, because MySuper is ultimately the signature reform from the Cooper review into superannuation. The focus of these reforms is on lowering fees and improving efficiency in superannuation so that members' savings are maximised.

MySuper will complement the government's policy to increase superannuation from nine to 12 per cent and is further evidence of Labor's unwavering commitment to superannuation to help Australians save for a comfortable and enjoyable retirement. That is a particularly important theme with Canberrans I meet, particularly the women I mentioned before who are over 60 and are doing it tough and have not had the opportunity to save for a comfortable and enjoyable retirement. It has been a theme of many speeches I have made in the two years I have been the member for Canberra. I gave a speech early on in my term on finance being a feminist issue. I encourage women, the sisters of Canberra, to actually engage in understanding their financial health and to become literate about their finances so that they will know what they need for today to have a comfortable lifestyle and, most importantly, what they will need in savings in the future to ensure a comfortable retirement. As I have said, a number of Canberrans I have met are unfortunately not enjoying a comfortable retirement.

I know my own mum, who did it tough for most of her life, only had about $5,000 in super when she retired. She is now on the pension. She is supplementing that by cleaning houses. My sisters and I are helping her out with funding for holidays and for the theatre—she is a great theatre fan—and so that she can enjoy a comfortable lifestyle and some of the simple pleasures that she enjoys. They have not been accessible to her because, unfortunately, she did not have enough money in the bank in terms of superannuation when she retired.

This bill will require employers to pay the superannuation guarantee contributions on behalf of an employee to a fund that offers a MySuper product unless the employee has made an eligible choice of fund for their contributions to be paid to. Employers that pay default superannuation guarantee contributions to a fund that does not offer a MySuper product will be in breach of their superannuation guarantee obligations and will be liable for the superannuation guarantee shortfall.

The bill will also require a trustee of a superannuation fund that wishes to offer a MySuper product to be authorised by the Australian Prudential Regulation Authority. The bill only permits trustees to be authorised for one MySuper product per fund unless they qualify for one of two exceptions to be able to offer more than one product. Firstly, trustees will be able to offer tailored MySuper products, to large employers who contribute to the fund for at least 500 employees, designed to suit the needs of that particular workplace. Secondly, funds will also be able to offer multiple MySuper products in certain limited circumstances to preserve an existing corporate brand. The branding goodwill exemption will allow merged funds, in which there was material-branding goodwill prior to the merger, to maintain their existing brand names and continue offering different MySuper products. Trustees that wish to offer more than one MySuper product will be required to be authorised for each MySuper product they wish to offer.

The bill outlines the core characteristics of MySuper products and the process to apply for authorisation of a MySuper product. The characteristics include: there is a single diversified investment option, which can be a lifecycle approach; all members have access to the same options, benefits and facilities, and the same process is adopted in crediting and debiting member accounts; and a member's interest cannot be transferred without the member's consent except to another MySuper product in the fund or as required or permitted under a law of the Commonwealth.

In addition, trustees will only be permitted to charge four types of fees within a MySuper product and will be required to charge fees to members under one of the fee-charging rules. This will facilitate members, employers and market analysts to make direct comparisons of MySuper products based on the actual fees paid.

As I said, this bill introduces the core elements of the MySuper reforms. The remaining elements of the MySuper reforms—including enhanced trustee duties, insurance arrangements and disclosure—are dealt with in other tranches of legislation.

This is a good bill. It will encourage the industry to become more competitive, and the people who will benefit the most will be young workers. We know that in order to maximise your retirement income it is important that your super fund, particularly if it is a default fund, is a low-key, high-performing fund. This legislation will maximise retirement incomes by making sure that only those super funds that deliver and continue to deliver for their members will be able to be included as a default fund option in modern awards and enterprise agreements.

It is estimated that 4.5 million Australians will hold a MySuper account once this legislation is fully implemented and that those people have the potential to be $40,000 better off in retirement. That should be reason enough to introduce this important legislation.

MySuper has been implemented in response to the Cooper review, with the final report highlighting that not everyone wants to make a choice about their superannuation, and that often default members are not adequately protected and can find they are paying for services that they do not necessarily need. Although I am a strong advocate for financial literacy, particularly for women and particularly when it comes to superannuation, we also need to balance self-empowerment—which I strongly encourage through a range of seminars that I have with women and in speeches—with adequate regulation of the industry. This is the best way to protect the retirement savings of workers and encourage more confidence in the superannuation industry.

As you can see, Labor has a very clear plan when it comes to superannuation and helping Australians save more for their retirement.

But there must also be an onus on the superannuation industry itself to facilitate higher retirement savings through greater efficiency and lower fees. This latest tranche of legislation will ensure our superannuation system has a simple, cost-effective product so that members' savings are maximised. I commend the bill to the House.

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

The Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011 follows the Cooper review into Australia's superannuation system and has the aim of introducing a new low-cost superannuation product, known as MySuper, to replace existing default superannuation fund products, as outlined in the superannuation system review of 2011. Specifically, the bill defines what a MySuper product is and sets out rules for payments, contributions and account transfers for MySuper products. It also sets out the fees which can be charged and the basis on which those fees can be charged to members of a MySuper fund. The coalition has been consistent in supporting changes to the superannuation system which make it more efficient, more transparent and competitive, with the ultimate objective being to improve the value of super funds for members.

Under the bill, from 1 October 2013 employers will have to make default superannuation contributions for employees who have not chosen a fund which offers a MySuper product. However, I note today that the government has chosen to introduce last-minute amendments to push the date out to 1 January 2014. Why should we be surprised at anything that comes from this Labor government, a government which has refused to open the default fund market to competition and choice?

The bill contains a number of what many Australians would deem minuscule changes. However, each one of these changes is important and I want to make sure the people of Wright, whom I am proud to represent, get the best possible deal. I support constructive, healthy changes which make our superannuation system more efficient, transparent and competitive and thus improve value for super fund members. As members have heard me say before, it is critical that appropriate policies be implemented for the benefit of the Australian people—I speak specifically for the people of my electorate of Wright—who want a government which can lead and support them, and it is our duty to make sure that we get it right. The best way to maximise value for consumers across all parts of superannuation—and the value proposition includes fees, fund performance and service—is to maximise competitive tension in an appropriately transparent system.

The first point I want to make is about implementation. I do not believe that any member on this side of the House is surprised that the bill seems rushed, disorganised and poorly constructed. The initial MySuper proposal, to design a superannuation product and impose pricing through legislation, would have created unnecessary inefficiencies and left many consumers worse off. Research from well-known superannuation consultants Chant West found that the originally proposed version of the bill was going to mandate that only a particular fee level could be charged. Some 750,000 Australians would have been forced to pay higher fees than they were then paying. The coalition is certainly pleased that the government has decided to back away from that approach.

Unfortunately, the bill mandates that from 1 January 2014—if the government amendments are successful, of course—employers can make default superannuation contributions to MySuper products for employees who have not chosen a fund. That is, while every default fund has to be a MySuper product, not every MySuper product will be available as a default superannuation fund. The decision about which funds are selected as default funds will be made through a secretive, non-transparent and non-competitive process which will remain with Fair Work Australia. Given Fair Work Australia's performance in recent times—I refer to delays of up to four years, in some instances, on union issues—I do not trust Fair Work Australia to deliver outcomes on this in an appropriate time frame.

I recall that in August 2010 Labor promised, in addition to their other promises, that an elected Gillard government would ask the Productivity Commission to design a transparent, evidence based and competitive process for the selection of default funds under the modern awards. Unsurprisingly, that promise has also not been fulfilled.

The regime to be introduced in this bill only negatively adds to the uncompetitive idea of the current modern award system as it applies to competition in the superannuation sector. Given the consumer safeguards prescribed by MySuper products under this legislation, any MySuper product should be available for selection by any employer as a default fund to make default super contributions for employees who do not have a chosen fund. Unfortunately, the government has failed to take this opportunity to expand the range of default superannuation funds that employers can choose to make contributions to. The government should act to fix this issue by removing the need for Fair Work Australia to select which MySuper products can be used as a default fund in each award.

It is of no consequence that these arrangements are to the advantage of the industry funds and public sector funds, and it is those funds that are closely aligned with—you guessed it—the union movement. It seems that each bill brought to the House by Labor has three motives: it gives more support to its union buddies; it puts its hands in the pockets of mums and dads, looking for new taxes; or it somehow manages to get an increase from the Public Service sector. This bill just looks after union mates.

I want to highlight briefly the failure of competitive neutrality in the way that intra-fund advice is treated. The explanatory memorandum indicates that a superannuation fund would be able to charge for expenses incurred in the provision of intra-fund advice as part of its overall administration fee charges to fund members of a MySuper product. Intra-fund advice is a term commonly used to describe financial advice that a superannuation fund provides to its members. This advice fee would not only be bundled into an administration fee but also be charged to all fund members, irrespective of whether they access such advice. I cannot think of any situation in the commercial world where you would be charged for not asking or receiving anything. It is quite hypocritical.

The provision for the intra-fund advice has been included by the Minister for Financial Services and Superannuation. This hidden fee or secret commission is completely inconsistent with the changes the government is seeking to impose on small business financial advisers under the FOFA. The coalition's proposed amendments to this bill ensure that no fees for personal financial advice can be bundled into an administrative fee for the purpose of a MySuper product and charged to the fund members irrespective of whether they access the service or not.

The Australian people want and need to be given every opportunity to face the challenges that lay ahead. With this bill they want good policy that proves to be beneficial to their super and keeps the economy strong. We do not want to see mums and dads and hardworking business owners—everyday Australians, like the hardworking families in my electorate of Wright—left behind. This is what will happen if we do not make every effort to work together to get an effective policy.

Unfortunately, this proposed superannuation legislation amendment, MySuper Core, once again puts forward the government's inconsistent approach to its selection of default funds. Australians—more specifically, the people of Wright, whom I represent—have the right to know the basis upon which default funds are selected. MySuper funds should, according to the government, provide cost-effective measures for employers. However, if this system does not perform to that standard then it is the members who will suffer, because it is their money, the money they are counting on to support them later in retirement, which will end up going towards more administration costs.

This government has a duty to protect the Australian people. By hiding behind Fair Work Australia's approach to the selection of default funds and adopting a lazy attitude to honesty and transparency, they are only accentuating their own attitude to healthy, productive policy. That goes without saying. It is an act that my constituents in the electorate of Wright can see straight through.

Andrew Leigh (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

Retiring with dignity after a lifetime's effort and contribution should not be a luxury reserved for a few. Thanks to successive Labor governments and their vision for the future to introduce, enhance and defend the superannuation guarantee for all Australian workers, retiring with dignity is a rite of passage for Australians. Addressing the Australian Graduate School of Management in 1991, Paul Keating said of the superannuation guarantee:

It will make Australia a more equal place, a more egalitarian place and hence a more cohesive and happier place.

Prime Minister Keating said it was the safety net most Australians would need when they retire.

The Labor tradition of looking after Australians through adequate retirement savings continued at the 2010 election. At that election our government made a commitment to introduce a simple cost-effective superannuation product to replace existing default superannuation products. That flowed out of the Cooper review and the choice architecture framework in the Cooper review. The Cooper review was commissioned by Senator Nick Sherry, one of the greatest champions of superannuation that the parliament has ever known, on 29 May 2009 when he was then the Minister for Superannuation and Corporate Law. The review, chaired by Jeremy Cooper, noted that all members want to make choices about their superannuation. It noted that the current assumptions that underpin the superannuation system are that all members want to make choices about their superannuation and that all members are interested in receiving a variety of superannuation services.

But the report noted that that was not always the case. It recommended that the government introduce a new, simple, low-cost default superannuation product called MySuper that was based on providing a simple, cost-effective product for those who have chosen not to have direct engagement in their superannuation decision making. The philosophy in the early nineties was that everyone would choose the best fund and choose the best plan within that fund. But behavioural economics has taught us that that is not always the way that people approach decision making. Most people take the default fund and the default plan.

So the focus of MySuper needed to be to make sure that defaults were good plans. By having lower fees and more efficiency, we maximise members' savings. On one estimate, the movement to MySuper products with lower fees can be the equivalent of an extra one per cent of earnings going into superannuation—that is, the philosophy of MySuper underpinned by behavioural economics. Behavioural economics has come strongly into the public policy world thanks in part to the terrific book Nudge: Improving decisions about health, wealth, and happiness by Richard Thaler and Cass Sunstein. They came up with a concept they call 'libertarian paternalism' which is based on the notion that, as Milton Friedman said, people should be free to choose. Thaler and Sunstein like to say that libertarian paternalists want to make it easy for people to go their own way.

MySuper takes away no-one's freedom. What it does is recognise that in busy lives people are often attracted to default. As the Cooper review noted, libertarian paternalism is:

… the idea that the outcomes experienced by inert or disengaged consumers should have inbuilt settings that most closely suit those consumers’ objective needs, as assessed by the expert providers of the product or service in question.

It went on to say:

Importantly, this does not amount to a centrally-determined 'boilerplate' option for everybody, as it must at all times have regard to the collective characteristics of the particular consumers affected, any of whom can at any time opt out if they want to take more control for themselves.

That is the philosophy: high quality defaults but choice if you want to exercise it.

A report by the Industry Super Network, called Supernomics, also focused on some of the new insights flowing out of behavioural economics. That report noted that only around three per cent of members switch fund every year. It noted that the majority of superannuation consumers are passive consumers and, indeed, that most members who were either not aware that they had a choice or did not exercise a choice could end up being at a disadvantage. It noted the reasons for this passivity. There is myopia—a sense of focusing on the present, not on the benefits of retirement savings that will be felt in decades to come. The problem with this is that if young workers are myopic then they are making the wrong choices at the time it matters the most. Making a bad investment choice when you are at the beginning of your career means that you miss out on benefits that will continue to accumulate later.

The Supernomics report also referred to risk aversion, a shying away by young workers from investment choices, such as stocks, that have a high risk but a higher long-term return. Research indicates that people place greater weight on avoiding losses than on achieving equivalent gains. We saw that, sadly, during the global financial crisis when, at the bottom of the market, a substantial number of superannuation switchers moved from shares into cash. That meant, of course, that they locked in their losses. There is a reluctance to switch funds, even when fund switching could benefit workers in the long term.

The Cooper review noted that members who chose the default superannuation option in their fund did not have adequate protection from underperformance. They could be paying for services they did not need, did not request or did not receive. The Cooper review also noted that trustees of superannuation funds were not always focused on maximising members' retirement incomes in an efficient and cost-effective way. I commend those who worked on the super review, including Treasury executive director David Gruen—who, as it turns out, is the brother of Nicholas Gruen, possibly Australia's most passionate behavioural economist.

The solution that came out of the MySuper report is a single diversified investment strategy. It can be a life-cycle approach. Life-cycle investing is the notion that investment products should be riskier at the early stage and then move towards less volatile products as the person approaches retirement. It emphasises that it ought to be simple and that consumers ought to be able to compare on the basis of the fees that a fund charges.

For employees who have not made a choice of fund, superannuation accumulation will be paid into MySuper. But we are not taking away choice. All members will have access to the same options, benefits and facilities. For a super fund to be named in an award, it must offer a MySuper product that is reviewed by Fair Work Australia. Funds can tailor MySuper products to employers with over 500 employees to meet the needs of their particular workplace. MySuper trustees must articulate the targeted rate of return over a rolling 10-year period, with the level of risk determined appropriate for its MySuper members. Fees are limited to the following: an administration fee; an investment fee, including a performance based fee; an exit fee, which must be limited to cost recovery; buy and sell spreads, again limited to cost recovery; and a switching fee, also limited to cost recovery. All the fees charged for a MySuper product must be able to be included under those standard descriptions. That will help members, employers and market analysts make direct comparisons—apples with apples—of MySuper products based on the actual fees paid.

The bill requires that in any performance based fee arrangement with a fund manager in respect to assets of the MySuper product, trustees have to include measurement of performance on an after-tax basis, a reduced base fee that reflects the potential gains the investment manager receives from performance based fees, and provisions for the adjustment of the performance based fee to recoup underperformance.

Trustees wanting to offer a MySuper product will be required to hold a specific licence issued by APRA. All APRA regulated funds will be required to offer life and total and permanent disability cover on an opt-out basis, and would consult on implementation. Trustees must at a minimum allow members to opt out of life and total and permanent disability insurance within 90 days of the member joining a fund, or on each anniversary of the member joining the fund. That is important because we do know of instances in which members are being both under-insured and on occasion over-insured and are being defaulted into insurance options that they would not choose if they were not the default products. Members must be able to increase or decrease their insurance cover without having to leave MySuper. In this sense we have unbundled the insurance and retirement adequacy components of superannuation, ensuring that individuals can make a choice of the right investment strategies and the right insurance options for them.

Those opposite, as has traditionally been the case, have taken a raft of different positions on superannuation. When Labor introduced universal superannuation in the early 1990s, the opposition said it would be a bust to business. It said that businesses would never be able to sustain the cost of superannuation. Of course, that was wrong then and the coalition's opposition to superannuation is again wrong now.

The history of superannuation is that Labor universalises it and the coalition is unwilling to extend those increases. In 1996 we saw the Howard government block the planned increase of the superannuation contributions. On 23 March the Leader of the Opposition said: 'Well, we strongly oppose the superannuation increase. We have always as a coalition been against compulsory superannuation increases.' The Leader of the Opposition now appears to be saying that if the coalition were to come to office they would continue the increases in superannuation. It is quite unclear what those opposite think about superannuation. But they ought to think first and foremost about the interests of retirement adequacy for Australians. Those opposite, as is the case for all members of this place elected after 2004, receive 15 per cent superannuation contributions. So, 15 per cent is appropriate for them, but somehow they believe that for their constituents nine per cent will do. We do not believe that. We believe that 12 per cent of earnings ought to be the bare minimum that Australians put into superannuation, because that is appropriate to maintain retirement adequacy.

In his opposition to compulsory superannuation, the Leader of the Opposition faces the challenge that he intends to repeal the mining tax, which funds the increase in compulsory superannuation. Yes, superannuation comes from earnings, but because it is taxed concessionally each additional percentage point of universal superannuation costs the government about a billion dollars. So, increasing compulsory superannuation does have a budgetary impact through forgone taxation, and those opposite are going to have to identify where the money is coming from if they support the increase from nine to 12 per cent, as they should.

We on this side of the House are proud to be the party of superannuation. We are proud to be the party that will see the superannuation system grow to $6 trillion by 2035. And in these reforms we are recognising the new insights in behavioural economics, which demonstrate that defaults must be great because most Australians do not spend a great deal of time focusing on their choice of fund and their choice of investment strategy.

We need higher superannuation contribution rates, from nine to 12 per cent, but, complementing that, we need a MySuper product, flowing from the work of the Cooper review, that ensures that Australians get the best deal, have the lowest fees and the highest returns, because that is how they will ensure a dignified retirement.

Deborah O'Neill (Robertson, Australian Labor Party) Share this | Link to this | Hansard source

I rise today to speak on the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011, which will be another delivered election promise from this Labor government. The bill is all about providing a simple, clear superannuation alternative for thousands of Australians. We believe that superannuation is a right owed to working Australians. It should be simple and it should be there to support the many in our community. We certainly would not have had superannuation if those opposite had had their way at the time. This bill is very obviously based on Labor values, because it is making a positive difference to the real lives of ordinary Australians.

For many Australians superannuation will be the only substantial source of major savings for their retirement—apart from the family home, that is. As we are living longer after retirement it is vital that people are given clear and concise options about their retirement income. The superannuation industry was created by a government of vision, based on compulsory savings required by government. It is fair that this industry, which benefits so much from the compulsory savings system in Australia, gives back to the community with higher retirement savings through greater efficiency and lower fees.

From its introduction in the nineties, by another reforming Labor government looking after the interests of working Australians, superannuation has become a key pillar of our nation's retirement income system. Superannuation investment will grow and grow as more Australians make voluntary contributions for their future and compulsory contributions increase over the coming years, from nine per cent to 12 per cent. The importance of the superannuation system to the retirement income of everyday Australians means that there is a strong public interest in ensuring the system operates effectively to invest retirement savings with the ultimate goal of providing adequate benefits to members in their retirement.

Despite its importance, many Australians do not make choices about where their super goes. The fact of the current situation is that about 60 per cent of income earners are put into default accounts not tailored to individual needs or goals. I wonder at this time, when football fever is at a pitch, whether it is fair to make a comparison between the energy Australians invest every week in picking their winning teams for the footy comp and the engagement they have with superannuation. I am sure that they are both important in their own way, but the reality is that the dryness of some of the decisions that we make about how we invest our money seems to be very disengaging to very many Australians. I am also mindful that I have one of my local schools, Umina Public School, visiting this place today. I will be going to meet them at hospitality shortly after this to welcome them to the parliament. For them, certainly, ideas about superannuation are not the regular conversation of the playground, and understanding about what it could mean for their life in the future is quite limited. I will ask them whether they have considered anything in this area, because there are precocious young ones who might have an interest in it.

For many of us, retirement is a distant horizon that some dream about and others perhaps fear. But it is not something we seem to commit much time or thought to during our working lives, except for mid-afternoon daydreaming. For others, the reality is that the superannuation system is too complicated to deal with. People fear making the wrong decision without even knowing it, so default options are considered by many to be a safe alternative. The superannuation industry caters well for people who want flexibility and who know what they want and need out of their investment. Self-managed super funds provide ultimate freedom for those who want to take that extra risk, but what is lacking are clear and concise options so that people can figure out what they are getting when they sign up. I will take this opportunity, as I do on every occasion that I talk about self-managed super funds, to indicate that they are a very effective investment vehicle, but those who are in self-managed super funds should know that they are not protected against theft or fraud. The recent work of this parliament on the Trio collapse has made that very clear. It is a vital piece of public information that we need to make sure is understood widely in our community.

The introduction of MySuper products will improve the experience of those members who accept the default option, by placing them in a product that is appropriate and that ensures that their financial interests are protected. The MySuper provisions will lift the standards of super products available to all Australians and deliver on Labor's commitment to reduce the cost of living for working Australians. If you are going to have your money working for you in a superannuation scheme, you want the scheme to be a no-frills model if you are not going to engage with it. You want to get the best value for all that money you are putting in for your future. The licensee funds that will offer these products will have heightened obligations to act in the best financial interest of members. You would think that that would be common sense, but, sadly, we have seen cases where some providers have put their own interest ahead of the people on whose behalf they are making investments. It is a significant change that is being introduced by this Labor government. The licensee will also need to consider actively whether their MySuper product has access to sufficient scale to provide net returns that are in the best financial interest of members. Importantly, MySuper products will not allow commissions to be paid from a customer's investment. This is something that seems to be common sense when we say it out loud, but the reality is that, before this government undertook significant reform in this area, commissions were being paid to providers of financial services to direct people in particular ways, not always in the customer's best interest but, rather, in the interest of the financial provider. This legislation makes the changes necessary to ensure that does not occur.

MySuper products will also be beneficial for members who do not require additional services, just a no-frills variety. For people who say: 'I want my super and I want to know it is being looked after. I don't want to have to spend too much time on it,' the MySuper product is really going to be a fantastic transformation in the superannuation industry. MySuper will simplify and standardise the default superannuation product available to Australians, which will make comparisons much more manageable by having a much more definable and comparable set of super products.

So instead of having to try to figure out all the fine print and compare apples and oranges and bananas, you will actually be able to have a look at MySuper 1, MySuper 2 and MySuper 3 and see what they offer and do a comparison against an established set of scales.

To bring simplicity and clarity to the super industry, MySuper products will be restricted in the types of and names of fees charged to accounts. So it will be easier for customers than it currently is to compare across funds and it will allow the industry to monitor returns in a way that communicates clearly to their customer base. The independent Cooper review found that fees in superannuation are currently too high—and I do not think any of the people in my seat of Robertson who have spoken to me would disagree with that; in fact, they are very keen to see this reform come through. There are situations currently where members may well be paying fees for services that they do not want and certainly have not requested. This is unfair for the majority of members, and it has taken this Labor government to implement these protections.

Every dollar that is taken in fees or other unnecessary costs is a dollar that does not make it into the pocket of the retiree. That is clearly where our focus is—looking after the ordinary, working Australians, too busy out there doing a hard day's work to come home and check their financial balances a day at a time. They need to be sure that the product that they have is simple and that they are getting really good value for that investment. Individuals can lose tens of thousands of dollars over their working lives, making being self-sufficient in retirement that much harder and reducing the time spend over a person's working life. Higher than necessary fees can total tens of thousands of dollars of lost retirement income. So this is not a small matter.

Australians should have confidence in the thought that, while they continue to work, their superannuation investment is under the care of fund managers and that, when they eventually begin drawing on their fund, fees and deductions have not left it barren. Those opposite, however, seem quite willing for this to continue. We must remember that they were the miserly voice in the public for some decades. They said year in and year out: 'Superannuation is too expensive. It'll send us broke. We can't afford it.' That is the same relentless negativity that we sadly see in so much of the debate in this place at the moment—a lack of vision for this country, a lack of willingness to do the hard work to set up structures that benefit the many in Australia rather than an entrenchment of privilege for the few.

Where do we stand now? We stand as one of the world's strongest economies. These are important reforms that will make a strong institution stronger. MySuper licensees will only be able to charge the following fees in relation to MySuper products. For people who are interested, these are the only things that they will be paying: an administration fee, an investment fee, a buy-sell spread, a switching fee, an exit fee and an activity fee. Super funds will be prohibited from charging any other types of fees in relation to MySuper products. This will prevent licensees from being able to deduct more exotic fees or unnecessary fees, which seem to have crept into the system, sometimes under such innocuous titles as 'entry fees'. By no means are these funds required to charge these fees for the MySuper products; however, if the decision is made, any of the fees charged must be one of the ones on the list above.

In addition, the Australian Prudential Regulation Authority will collect and publish data on MySuper products to ensure they are transparent and comparable. People will be able to go online and see the information and make comparisons at their own speed in their own time. The bill also requires MySuper products to meet minimum standards. These are that all customers will be able to access from their MySuper agency the same options and facilities and that the same processes are used when dealing with each customer's accounts. So everybody gets a go. There are not some who get a rolled gold version and others who are denied access. They should be able to get the same access. These standards will ensure that those Australians for whom a default super account is sufficient will receive adequate information and protection of their funds.

All superannuation guarantee contributions made by employers on behalf of employees that do not have a chosen fund and have not elected in writing to the RSE licensee to have their contributions made to a specified choice product will be paid into a MySuper product. This bill will have minimal impact on the obligations of employers' contributions. It is expected that most major superannuation providers will be licensed to offer MySuper products and most employers will still be able to utilise preferred funds already in use for super guarantee contributions. New employers, and employers making contributions to a fund that does not offer a MySuper product, will have to select a default fund that does offer a MySuper product. To make this process easier on the employer, it is intended that APRA will publish on its website a list of all funds that are authorised to offer a MySuper product.

While licences will not be issued to funds with fewer than five members, employers that pay contributions for more than 500 employees will be able to receive dispensation to tailor MySuper where it is viable to offer a distinct product to suit the particular needs of the workplace. These products will also be available to direct relatives of employees of large employers.

The government has been advocating for a number of years the benefits of making voluntary contributions to one's superannuation. Under these changes, no contribution limitation can be imposed on MySuper products. Contributions must be accepted to a MySuper product, whether they are made by an employer or the member directly. The kinds of contributions that may be made by or on behalf of members include, but are not limited to, superannuation guarantee contributions, salary sacrifice contributions, after-tax contributions and spouse contributions.

In summary, this legislation is key Labor legislation. It expresses our belief in the right of all working Australians to a dignified retirement which will be funded from superannuation. This legislation will exert downward pressure on the fees and charges paid by ordinary members in superannuation accounts that are on too many occasions far too high and inexplicable. This piece of legislation will have the effect of ensuring that, when people reach retirement, there will be more money in their accounts than there otherwise would have been if this bill had not been presented to the House. It is a Labor bill in the Labor tradition. We established superannuation and we continue to make it better and more accessible for ordinary working Australians. I commend this bill most heartily to the House.

Daryl Melham (Banks, Australian Labor Party) Share this | Link to this | Hansard source

The Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011, which we are debating today, represents the essence of Labor Party values—a fair go for all. The 2009 ALP platform states in its preamble:

Through the good times and through the tough times, the great mission of Australian Labor governments for more than one hundred years has been to improve the lives of ordinary Australians—giving every Australian opportunities through education and training, ensuring fairness at work and supporting Australians throughout the different stages and transitions of their lives.

The concept of the minerals resource rent tax is based on our fundamental principles of equity and of assisting all Australians now and into the future. The bill we are debating today is part of the strategy the government is employing to ensure equitable distribution of the national wealth.

MySuper is a key part of the government's broader Stronger Super reform package. Stronger Super also includes reforms to make the process of everyday transactions in the super system easier, cheaper and faster through the SuperStream package of measures; to improve the governance and integrity of the superannuation system, including the rules that apply to superannuation trustees; and to improve integrity and increase community confidence in the self-managed superannuation fund sector. Together, these reforms will reassure Australians that they can have confidence in the superannuation system that will support them into their future beyond work.

It was the Fisher Labor government that expanded and increased the old age pension, introduced a payment to mothers on the birth of a child and legislated for a national workers compensation act. The Scullin Labor government increased social service payments for people facing the Great Depression. The Curtin government introduced the first national system of widows pensions, expanded the child endowment, increased pensions for invalids and began funding hospitals for the first time. It was Ben Chifley who secured a major change in the Commonwealth Constitution to give the federal government power over social services, introduced legislation for a public health system that was to pave the way for a universal health scheme and invested in affordable housing for returned soldiers and the less fortunate. The Whitlam government introduced Medibank, legislated for free universal university education, introduced the land rights act, increased the age pension and introduced and passed the Racial Discrimination Act.

The Hawke Labor government introduced Medicare, reformed industrial relations, introduced the Sex Discrimination Act and the equal opportunity employment act and increased investment in the housing, health and education of Indigenous Australians. Prime Minister Keating promoted the causes of reconciliation and respected and protected native title through the Mabo legislation. It was the Hawke-Keating government that took the historic decision to introduce the reform of a national superannuation guarantee for all Australians. That, of course, was then opposed by the coalition, just as the initiatives that we are talking about today are being opposed by the coalition. The current Labor government abolished Work Choices; increased pensions; increased hospital funding by 50 per cent; massively invested in education infrastructure as well as roads, ports and rail infrastructure; is building the National Broadband Network; addressed climate change; and with this legislation is set to invest in the future of all Australians.

In my electorate of Banks, there are 50,500 working people who stand to benefit from the superannuation increase that will flow from the minerals resource rent tax. This will add almost $108,000 to the projected retirement incomes of an average 30-year-old worker in my electorate. This is what the Labor Party stands for and always has—taking those measures which will ensure a comfortable retirement for everyone, not just the wealthy. We are taking these measures which mean that all Australians benefit from the resource boom, not only the mining companies.

The first words of the Australian national anthem rightly state:

Our land abounds in nature's gifts.

What we in the ALP are about is sharing nature's gifts. The government appreciates the fact that many Australians do not currently reap the benefits of the resources boom. We understand that some small businesses and households are doing it tough. We have to make sure that we have a future beyond the mining boom and that we share the benefits with future generations.

This bill contains reforms for the long term that will benefit millions of our citizens through their superannuation savings and provide direct benefits to small businesses. Labor believes in this reform so all Australians can benefit from the mining boom, as I said, not just the mining companies. The direct result of this measure will be an increase in superannuation as the guarantee is lifted from nine per cent to 12 per cent for around 8.4 million working people, increasing retirement savings by $500 billion by 2035, as well as providing 3.6 million low-income earners with concessions worth $800 million a year on employer super contributions.

This bill introduces the core elements of the MySuper reforms. These will be simple, cost-effective default superannuation products that will replace existing default products. Authorised superannuation funds will be able to offer MySuper products to members from 1 January 2014. MySuper 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 downward pressure on fees. These reforms deliver on Labor's election commitment to provide a better deal for the many Australians who choose not to take an active role in managing their superannuation but who rely on superannuation funds to act in their best interests.

In contributing to the appropriations bills debate in 1992, I said of the achievements of the Hawke government:

Social justice is about the quality of life. It is about recognising the differences which exist in society and implementing policies and programs which will ensure a fairer and more prosperous society. The Government is rightly proud of the reforms achieved in social security and health over the last decade.

…   …   …

The Government will continue to implement policies and programs which will benefit all Australians. It will continue to address the needs of the less fortunate in our community while seeking to raise the standard of living for all Australians.

I am proud to say that, almost 20 years later, those words still ring true about a Labor government. I commend the bill to the House.

It seems to me that the difference between those on this side and those on the other side can be summarised by the fact that we in the Labor Party have a safety net. We look after those who are disadvantaged, those who are underprivileged, and Indigenous Australians. True equality requires differential treatment to try and bring people to a level of equality.

Those on the other side have a different belief. They believe in upper middle-class welfare and business welfare. That was the hallmark of the 11 years of the Howard government: a redistribution upwards to those who could afford it; and those who could least afford it were the ones who paid for it and subsidised it. That was the basis behind the regressive 10 per cent consumption tax that was applied across the board. That tax applied equally to Kerry Packer and to an Indigenous Australian. That tax added 10 per cent to the burden of providing a funeral for someone at the end of their life. It was regressive. Why? Because there is a view that the privileged should become more privileged. That is what the mineral resources tax is all about for the coalition—to give the rich more. What we on this side say is that we want to create a productive environment for business. We want productivity and this superannuation bill before the House—

Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Competition Policy and Consumer Affairs) Share this | Link to this | Hansard source

The House was affording the member for Banks quite a wide range there, but the member has belatedly thrown a life-saving ring towards the topic that he supposed to be speaking about. I recognise his dexterity there and I encourage him to be more dextrous if he is going to stray off the reservation like that!

Daryl Melham (Banks, Australian Labor Party) Share this | Link to this | Hansard source

The importance of this measure—and let us recognise it—is that the state cannot afford in years to come for measures like this not to pass the House. We have to assist that section of our community who can make provisions for their own retirement so that the remainder who are vulnerable—women who are not in the workforce, Indigenous Australians and others—can be looked after through our pension system.

It beggars belief that those on the other side would not support a MySuper package as a trade-off in fairness and a trade-off in equity. At the same time as the conservatives sit mute, the states are increasing the cost of production for mining companies in those states—because they are Liberal states. The minister at the table, my good friend Mr Crean, is a former ACTU president. He understands this through his working experience before he came into this place and through his experience in this place.

The role of government is about measures like this bill that is before the House today. It is interesting that, historically, the conservatives have opposed this measure every time a Labor government has sought to introduce it. It is interesting that once a measure is passed, they are reluctant to tamper with it. What we are seeing here is an engagement in a political exercise. It is a lot easier for me to support the minerals resource rent tax when the trade-off is the legislation that we have got here today—fair, equable, balanced legislation that is in the national interest.

Tony Zappia (Makin, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011. Can I begin by commending the member for Banks for his contribution to the debate on this legislation. He has summed up the issues very well.

This legislation arises from the Cooper review of superannuation that was commissioned by this government and which I understand contained many, many recommendations; in fact, if my memory serves me correctly, something like 70-plus recommendations. As the minister said in his second reading speech on 3 November 2011, 8½ million Australians have superannuation funds with the total pool of super funds estimated to be in excess of $1.3 trillion.

The concerning point with respect to those statistics is that 60 per cent of Australians do not actively choose where those funds are placed. We know that with superannuation payments rising from nine to 12 per cent over the next decade the pool of funds will grow, and more Australians will have money invested in superannuation accounts. We also know that currently people who have money in superannuation accounts pay on average $85 in monthly administration fees. Paying $85 per month in administration fees results in less funds at the time of retirement. In fact, I have looked at some statements where, as a result of those administration fees, at the time that the contributors cease working at a particular place of employment, they end up having less money than they started with.

This legislation enables a simpler and less costly super option. An example, as others have said, is that under this legislation a 30-year-old on full-time average earnings could be $150,000 better off at retirement. I said a moment ago that over the next decade superannuation contributions would increase from nine to 12 per cent. Superannuation contributions are not just voluntary contributions—they are compulsory savings and not a matter of choice. They are savings that are, effectively, made by employees who forgo increases in their earnings entitlement on a weekly basis, through productivity gains and the like, that they might otherwise have received through their enterprise negotiations, so that those monies can be put into a superannuation account so that it is available for them at the time of their retirement.

Employers are required to make the necessary contributions with respect to those superannuation payments. For employers those contributions also become tax deductions and that in turn means that the broader Australian public has also made a contribution, through that tax deductibility, for the funds that end up in superannuation accounts. In other words the cost is borne by all Australians. The only choice that the employees have about their super funds is in which fund their money is placed. Let me be clear about who those funds belong to; they belong to the working Australian people who forgo wage rises in order to make the superannuation contribution possible.

Superannuation fund companies are, in turn, regulated by APRA. Can I say in respect to that that I support and appreciate the changes that have already been made as part of the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012 to ensure that APRA has more powers with respect to overseeing where those superannuation funds are placed and how the various companies manage the funds placed with them. Having said that, it is still of some concern to me that the regulation does not guarantee that the total funds deposited will always be there on retirement. If bad investments are made by superannuation companies, losses can occur. Those losses are in turn passed on to the individual superannuation fund account holders. In fact, over the last few years we have seen significant evidence of that when, as a result of stock market crashes around the world, people have lost a substantial portion of their superannuation funds. If they have not lost it entirely, they have certainly seen their funds eroded. Hopefully, because the funds are still in those accounts they might rebound as a result of stock market improvements.

The point I make about stock markets, however, is that when funds are placed with the stock market they are put at some risk. It is that risk that is still of concern to me. Passing the blame by claiming that employees choose their fund, and therefore the risk, is in my view an unacceptable excuse by those who seek to deflect blame and responsibility. Personally, I would much rather see less risk taken, and lower returns, than any losses being made at all. I welcome the simpler and easier option brought in by this legislation of allowing employees to choose where they place their funds.

I want to make a comment on some specific matters. The first is in relation to the fees. The basis for calculating fees must be transparent and it must reflect the real cost of managing those funds. In fact, I question why any fees are charged at all and why the fees, totally, should not be deducted from the total earnings of the company and not passed on directly to each account holder. This would be similar to what banks do if you have money invested in a savings bank account. In the past no fees were charged because the fees would have been deducted from the profits accrued by the bank in having those funds.

Secondly, I question why funds cannot be lodged directly with banks in a fixed deposit scheme, with similar withdrawal conditions to those that apply to superannuation companies. It would seem to me that if you are entitled to deposit your money with a superannuation fund, with conditions relating to the withdrawal of those moneys, then you could apply a similar regime to allow someone to deposit their money directly with a bank.

Thirdly, my view is that all super funds should be used to support nation-building public infrastructure, which would in turn justify a government guarantee of funds. One option for investing could be in building houses. I note that former Prime Minister Paul Keating recently made this very point when he suggested that super funds could be used as a source by the banks for the purpose of providing home loans. If super funds could be accepted by banks, that would be possible. It is a view that I share. In fact, I would probably go further with respect to the use of funds to support banks, but I will leave that for another debate on another day.

In the last couple of decades Australian housing prices have escalated. Home ownership has become more difficult. Housing prices are a good indicator of economic conditions, and rising housing prices may be a positive reflection of a strong Australian economy. But for young home owners and home-owning aspirants, high housing prices are not good news at all. Not surprisingly, home ownership rates have fallen in recent years. Between 2006 and 2011 home ownership rates for families with children have fallen from 79.5 per cent to 77.2 per cent. It might only be two per cent, but in reality that is a significant drop when compared with home ownership rates over recent decades in this country. In fact, Australia has always prided itself on the level of home ownership amongst families. Nationally, over the same period, household monthly mortgage repayments have gone from $1,300 to $1,800, and weekly rentals have risen from $191 to $285.

Interestingly, home ownership has become more difficult since the closure or sell-off of public banks like the State Bank of South Australia or the Commonwealth Bank, nationally. The State Bank of South Australia got into financial difficulties, but not because of housing funding, for which it was purposely established. It ran into difficulties because it ventured into non-housing projects and risky commercial dealings. Had the State Bank of South Australia stuck to housing, it would have remained viable and been able to continue to serve a valuable public purpose.

In the absence of government owned banks, the use of super funds to build housing has considerable merit. It would result in more affordable housing, higher home ownership, less demand for rental homes and more stable families and communities.

Turning back to the specifics of this bill, the MySuper core provisions of this bill, I believe, should be welcomed by everybody. This is legislation that, as I said from the outset, enables super account holders to choose with much more ease where those funds are going to be lodged. It enables those funds to be managed much more simply and, hopefully, more cheaply, which ultimately means more funds at retirement for workers throughout Australia. The legislation, I believe, is a vast improvement in managing the $1.3 trillion of superannuation funds that currently exist throughout Australia. I commend the bill to the House.

Sharon Grierson (Newcastle, Australian Labor Party) Share this | Link to this | Hansard source

It is a pleasure to rise and follow the member for Makin, who I think captured so well the Labor principles and policies we have introduced and why we have introduced them into superannuation reform. I too rise to speak in support of the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011. This bill seeks to amend the Superannuation Guarantee (Administration) Act 1992 and the Superannuation Industry (Supervision) Act 1993 creating a cost-effective no-frills superannuation default product. It was the Australian Labor Party, under the Keating government, that first introduced compulsory superannuation, and today in 2012 our present government is building upon our great legacy by strengthening superannuation, by creating options for ordinary consumers and by increasing superannuation from nine to 12 per cent. With this bill we are implementing the central elements of MySuper and delivering on our government's election commitment to deliver a simple and affordable super product that will replace existing default super products. These reforms are part of Labor's Stronger Super package. It is a very extensive one and one that all of us on this side of the House take great pride in.

This bill authorises APRA (Australian Prudential Regulation Authority) regulated super funds to offer a MySuper product from 1 July 2013. The bill will make it mandatory for an employer to make superannuation contributions to funds that offer a MySuper product from 1 October 2013 ensuring that superannuation guarantee requirements are met. I must say that in all the time I have been here, one of the proudest achievements for me personally has been making sure the Australian Taxation Office took very seriously the matter of contributions from ordinary people, and from the businesses that employ them, actually being put away. I have seen the ATO become much more aggressive on that and I have seen government follow the recommendations. To see people die in their workplace only to find their superannuation entitlements were not being put away has a devastating personal impact on families and on people left behind.

This suite of legislation is something that we really should be very proud of, all of us. It makes it mandatory for an employer to make those contributions to funds that offer this product. Employers that pay default super contributions into funds that do not offer a MySuper option will, from that date, be in breach of their obligation and, as such, liable for the shortfall. This is about fairness for ordinary working people and ensuring that they have more money to retire with.

Within this bill are also the requirements for authorisation of MySuper products, as outlined by APRA, that must be met by fund trustees offering a MySuper product. It also contains the key features of such a product, as well as the permitted fees and charges associated with them. I think we know how important that is. There has not been consistency. There has been great inconsistency about fees in superannuation funds, and we want to see a downward pressure on those so that people do have confidence that the money they are putting aside is accumulating at the right rate and is not being eroded by a fee schedule that is too high.

The key features of a MySuper default product include a single diversified investment option. All members must have access to the same options, benefits and facilities. The same process must be adopted in crediting and debiting member accounts. Member's interests cannot be transferred without consent except to another MySuper product within the fund. To add to this, trustees will be permitted to charge only six types of fees within a MySuper product. These fees must also be described in the same way, ensuring that members, employers, advisers and analysts can make direct comparisons of MySuper products based upon actual fees paid. APRA will make this information publicly available, ensuring that those offering the MySuper product are acting in a transparent and accountable manner. How important is that for young people who are often not very aware of where their money is being put, or how it is being managed in superannuation funds, and who may be in several superannuation funds in part-time work?

MySuper will build upon and improve the standards of default funds, with RSE licensees having increased obligations to act in the best financial interests of those members of default funds. BT Financial Group has indicated that within 10 years our nation's superannuation pool will double to around $2.8 trillion. Superannuation is for many Australians their only source of private savings for retirement. By 2035, our superannuation system is expected to grow to $6.1 trillion, according to Treasury projections. Such a large industry and one than it is compulsory deserves our ongoing attention as a government to ensure that the financial interests of all Australians are managed effectively and efficiently. It is our responsibility as a Labor government to ensure that this vast pool of money is secure and managed in the best interests of working Australians and their families, now and for future generations of retirees.

Our strong super reforms have come about in response to the Cooper review into the governance, efficiency, structure and operation of Australia's superannuation system, commissioned in 2009 by our government and handed down the following year. As then minister for superannuation, Minister Bowen, stated:

However, with challenges such as the ageing of the population, we must improve the system for the future. Every dollar we save in unnecessary fees and costs will help Australians' retirement savings go further.

Australians are ageing. That is something our government recognises and is preparing for, not only in our reforms to superannuation but also through our $3.7 billion aged care reforms, ensuring that options are available for older Australians to retire with in comfort and security.

On 20 June the Sydney Morning Herald reported that many Australians should expect to spend around one-third of their lives in retirement. The Age Discrimination Commissioner, Susan Ryan, stated that half the girls born today will live beyond 95. This clearly shows a vast difference between life expectancy during the time when superannuation was first introduced and the long and productive lives that our youngest generations today will enjoy into the future.

Research commissioned by National Seniors Australia indicates that almost 50 per cent of their current members have delayed, or intend to delay, their retirement to ensure their ongoing financial security into retirement. This clearly indicates that not enough is being saved. Of course, we have had the problem of the global financial crisis and the equity market underperforming. Is the reason for most of this that workers are not putting enough of their earnings aside, is it the way in which superannuation funds are structured or is it that money intended for retirement is being spent on the management of default superannuation funds?

Throughout the preparation of the Cooper review significant consultation occurred, with over 450 formal submissions. The review states:

The current superannuation system assumes that all members want to make choices about their superannuation and are interested in receiving a variety of superannuation related services. Default members are not adequately protected and can find themselves paying for services that they do not need or did not request and, on some occasions, they do not actually receive. Trustees are not always focused on acting for the benefit of members and maximising members' retirement incomes in an efficient and cost-effective way.

The simple fact is that consumers have said they would like access to a simple, low-cost, no-frills default option that maximises their interests and that does not have services they do not want—and that is what MySuper will deliver to them.

While there are those who plan meticulously ahead for their retirement, approximately 60 per cent of people in Australia do not actively participate in making choices when it comes to their superannuation fund or its ongoing management. That is understandable. Generally when a person begins a new job or career, perhaps in their late-teens or twenties, and begins their superannuation savings pool, retirement to them is far beyond the horizon, a distant and remote place in the future, something they never even think to consider.

But there is a correlation between high fees and the fact that consumers are not exercising the choices available to them. Unnecessary or unwanted options and services are being provided in cases where they are not requested or utilised. High fees ultimately mean a reduced funding pool for retirement. This is something our Labor government wants to reverse. We want to see lower fees and greater security and greater returns for older Australians—and that is what stronger super reforms are all about.

It is incredibly important that Australians have access to low-cost superannuation funds. Minister Shorten has stated that, on average, Australians pay approximately $85 each month in super fees. Compared to other monthly household bills—food, telephone, electricity and water—it is a considerable amount. Most people do not even know they are paying $85 in fees. Because superannuation is generally paid without us noticing, we lose track of the money trail, often blind to those ongoing fees.

Under our reforms trustees will be able to offer tailored MySuper products to employers of considerable size—those that contribute for at least 500 employees. Multiple MySuper products will only be offered by individual funds in limited circumstances to preserve any existing corporate brand that may currently operate. Of course, such trustees must have each product authorised as well.

By the middle of this century one-quarter of our population will have reached retirement. Today we must ensure that Australians will have enough money in their pockets at the time in their lives when they will need it the most. Labor's ongoing reforms to superannuation will ensure that, into the future, older Australians will have some peace of mind in their retirement, knowing that they will have—we hope—more money in their pocket because of our actions in this parliament today. Because of Labor's reforms, a 30-year-old full-time worker on average earnings will receive over $100,000 extra when they retire. Over the coming years we are gradually lifting superannuation from nine per cent to 12 per cent, benefiting over 8.4 million working Australians and their families.

Members of parliament get to travel around the world, and very few countries have a superannuation scheme such as ours. Many of them have a pension scheme of some kind, but when you consider the longer life span of people and the cost to government of an ageing population, that is not sustainable—and certainly some of the European countries are finding that out now. Yet superannuation contributed to by employers and by employees is one of the strongest policies we have ever seen in this country—it is the envy of the world. By lifting it from nine per cent to 12 per cent we are not just benefiting 8.4 million working Australians and their families but we are leading in terms of a very sensible approach to the demographics that Australia and the world are experiencing and the need for retirement security.

My government is delivering an extra super contribution to 3.6 million low-income Australians earning up to $37,000. Labor is also removing the age limit on the Super Guarantee, which means that over 50,000 Australians aged over 70 years will continue to be entitled to contributions. And people do make the choice to work longer. In the past it has been a disadvantage for them to work longer because of the fact that they were not able to benefit from any contributions to super. Our reforms will boost Australia's savings pool by $500 billion by 2035. This further strengthens our economy and ensures a fair Australia. MySuper is a Labor reform, and I commend the bill to the House.

Bill Shorten (Maribyrnong, Australian Labor Party, Minister for Financial Services and Superannuation) Share this | Link to 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.

Andrew Leigh (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

I thank the minister for his contribution. The question is that the bill be now read a second time.

Question agreed to.

Bill read a second time.