Wednesday, 27 November 2019
Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019; Second Reading
That this bill be now read a second time.
This bill amends the Superannuation Guarantee (Administration) Act 1992to improve outcomes for Australians by providing choice of fund for more people. This bill will commence on 1 July 2020.
Given the compulsory nature of superannuation, individuals should be able to decide where their superannuation goes.
Providing choice of fund to individuals should be simple. It was a recommendation of the Financial System Inquiry and the trade union royal commission. The Productivity Commission also found in their recent landmark report into superannuation that denying choice of fund can discourage member engagement and that this reform was 'much needed'.
This bill will extend choice of fund by narrowing the deemed choice provisions.
Under this bill, it will no longer be possible to deny choice to individuals on the grounds that they are employed under an enterprise agreement or workplace determination that specifies their fund for them.
For example, why should a student working two jobs—one in hospitality and one in retail—who is covered by separate enterprise agreements be required to have their superannuation paid to two different funds?
While it is pleasing to see that many unions have stopped negotiating to deny employees choice of fund, some unions continue with this oppressive practice. The Shop, Distributive and Allied Employees Association is a serial offender. It has recently attempted to deny choice of fund to people working for major employers of young people and casual employees in Australia—like Kmart.
The restriction of choice for Kmart employees was recently struck out by the Fair Work Commission, which found that forced choice of superannuation fund is a detriment to employees.
The FWC found that '[The detriment] may be monetary to the extent that the performance of the REST fund is less than what an employee might otherwise prefer or that employees required to have multiple funds are required to pay multiple fund fees.'
The behaviour of the SDA is particularly galling given that it represents workers in the fast-food, retail and manufacturing industries, many of whom are vulnerable due to their youth.
Moreover, lack of choice can force people to be stuck in poorly performing funds. A number of these accounts are subject to workplace agreements that restrict choice of fund. A sample study undertaken by the Attorney-General's Department shows that there are at least 290 agreements that restrict choice in some way to an underperforming fund.
At least 14,000 employees are forced to contribute to one of seven funds identified by Super Consumers Australia as the worst performing funds as a result of the restrictions.
Even when members are not forced into poorly performing funds, restricting choice often leads to the opening of another unnecessary account. The Productivity Commission report highlighted the negative effects that holding unintended multiple superannuation accounts were having on millions of Australians through duplicate fees and insurance premiums.
Getting rid of restrictions on choice complements the work of the government's Protecting Your Superannuation package. These reforms capped certain fees and drove consolidation of the current stock of unintended multiple accounts by introducing the ATO consolidation regime for low-balance accounts.
This bill is the next step in fixing the problem of multiple accounts by preventing Australians from being forced into having multiple accounts because of their enterprise agreement or similar workplace determination.
We want people to be able to make choices about their retirement savings—we want them to be active in making decisions about their future.
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.
To be clear, this bill does not prevent enterprise agreements from specifying a particular fund. It just allows individuals to choose a different fund if it suits them better. And in doing so, it puts those individuals on an even footing with the majority of the workers who already have this choice. Also, this bill will have no impact on default funds specified in modern awards.
Full details of the bill are contained in the explanatory memorandum.