Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Hansard source

This bill, the Treasury Laws Amendment (Putting Members' Interests First) Bill 2019, seeks to amend the Superannuation Industry (Supervision) Act 1993 and the Superannuation (Unclaimed Money and Lost Members) Act 1999 to improve the default insurance arrangements for superannuation. It aims to protect the superannuation savings of younger members and members with low-balance funds from being eroded by insurance premiums. It does this by removing the default life insurance option for these accounts. Labor supports these aims; however, it believes this bill requires some amendment in order to be able to properly achieve them without running the risk of unintended consequences.

Before moving on to the substance of the bill, I want to take a moment to reflect on the path that has brought us here. When this bill was introduced into the Senate in early July, the Senate referred it to inquiry with a reporting date of mid-October. Stakeholders and experts had suggested that there were implementation issues and potential unintended consequences arising from the quite technical amendments proposed in the legislation. The long reporting time frame would have given the committee time to engage deeply with these issues and hear from those who would be affected by the bill. Instead, the government chaired and government controlled committee decided to set a closing date for submissions of 15 July, just 11 days after the bill was referred. This was an incredibly tight time frame for submitters to compile the evidence and data that was needed. Despite that, despite an unreasonable time frame, 46 submissions were received, including submissions from super funds, academics, regulators such as ASIC and APRA, and other interested parties. It is unfortunate that the government chaired and government controlled committee did not schedule public hearings to interrogate this written evidence. Instead, it resolved to report early, on 23 July.

Of course, the government has not reflected this urgency in its subsequent actions. For the past three months, the bill has just sat here as this chamber has considered other pressing matters at length, such as the Governor-General's address-in-reply, which we considered again yesterday. It's unfortunate, because it is only now, in September, that we're debating this for the first time, and the intervening period could have been fruitfully used by the committee to interact with stakeholders and fully address the issues that they have raised.

One of the issues raised by stakeholders was the unreasonableness of the implementation time lines contained in the bill. The bill as drafted has an operative date of 1 October 2019, with a requirement for funds to inform their members about the changes by 1 August 2019. Those deadlines are clearly impossible now, in mid-September, but they were unreasonable even when the legislation was introduced, in early July. Requiring superannuation funds to implement the changes in the required time frame will pose significant challenges to the industry, and this is because they are technical amendments that reach right down into the individual policies that are offered through super funds to members. It takes time to work through the changes that are required, and the process is only made more complicated by the fact that these amendments will also interact with changes made through the protecting your super legislation very recently. The committee received numerous submissions from super funds explaining in patient detail the challenges involved in undertaking this body of work in such a short time frame, and their position was supported by the regulators. APRA considers that an appropriate implementation time frame would be, at minimum, six months but preferably 12 months from the finalisation of both this bill and the protecting your super legislation.

One of the challenges with meeting the existing timetable is that the proposed changes will result in significant pricing revisions. These changes will not just flow through automatically. Instead, the super funds need to go away and renegotiate the group insurance contracts with their insurers. This takes time, and it will take even more time because, instead of having to renegotiate and re-sign contracts in a staggered manner as contracts come up for renewal, insurers will have to deal with super funds en masse. And all of this is at the same time that the industry is grappling with the changes flowing from the protecting your super legislation. More time is needed. More time is required to enable the industry as a whole to undertake this repricing activity and engage in negotiations with insurers. If that time is not available, there is a risk that superannuation members will bear the consequences of harsh commercial negotiations.

This is why the Labor senators on the committee recommended that the commencement of the bill be deferred. We note that the government has circulated an amendment that would delay the starting time for this legislation. Although that amendment is enough to deal with the delays in having this legislation considered by the chamber, it's not enough to deal with the substantive concerns about timing that have been raised by stakeholders. Labor has also circulated amendments that would change the implementation time lines, and we will have more to say about those amendments during the committee stage.

The main concern that stakeholders raised, however, was the impact of this legislation on young workers in high-risk occupations. Australians have the right to expect that they come home safe and sound from a day's work. Unions have played an essential role in making sure that this is the case and continue to do so despite this government's ideological obsession with restricting the rights of working people and their representatives. Tragically, however, workplace deaths do still happen. Evidence from the ACTU is that from 2003 to 2016 more than 3,400 workers lost their lives on the job. That is a very big number. And, of those, close to 10 per cent were under the age of 25. This legislation would remove default insurance for workers under 25. The rationale is, in part, that workers under this age are less likely to have dependants and so insurance is less valuable for them and that workers under 25 are less likely to draw on their death or disability insurance. While this is no doubt correct for many of the individuals in this cohort, it is not entirely correct for young people who work in high-risk occupations. This bill, as drafted, would cancel the insurance for police officers, paramedics, construction workers, truck drivers, agricultural workers, forestry workers, prison officers, nurses and health-care workers, all of whom are at higher risk of suffering a workplace injury or, tragically, a workplace death. More than 27 per cent of workers under the age of 25 are in a high-risk job such as these. Insurance has real value for them and their families.

It has been suggested that if insurance is important to these individuals they could seek individual cover themselves rather than relying on the cover provided by their super funds. The truth is that 18- to 25-year-olds are not known for their engagement with risk management. And actually, in that regard, they are similar to the rest of us: nobody likes thinking about bad things, and humans are not so great at thinking long term into the future, particularly around financial questions. The question of life insurance and the risk of suffering an accident at work or on the roads are not front of mind for young people starting out in life. Even if it were, many would find it difficult to find alternative cover.

Mine Super is a fund that has 90 per cent of its members employed in high-risk occupations, and they told us in their submission that these occupations are often ineligible for retail insurance coverage and are uninsurable outside of the group insurance offering within the superannuation environment. In working in a high-risk occupation, these members have a higher chance of being exposed to a severe workplace accident and an increased probability of being off work due to illness or injury, which renders them and their dependents financially vulnerable. If our members can find insurance outside superannuation in the retail environment, the cost of insurance is often significantly higher than what Mine Super can provide. They go on to explain that they receive 800 claims per year, which represents approximately one in every 50 insured members making a claim in any given year. The ACTU likewise advises that this will cause insurance premiums to spike for those who prudently opt in as well as for existing members within the group insurance plan.

Labor listened to these stakeholders and moved amendments to protect workers in high-risk occupations. It is a shame that in the other place the government was unwilling to support those amendments. We will be seeking to have protections for workers in high-risk occupations included in this bill, and we'll have more to say about the necessary amendments in the committee stage.

I want to touch briefly on the gender dimension to these changes. Men and women have very different working lives. It means that many financial services laws that appear to be of general application actually have a different impact on men and women as a cohort. The government does not appear to have given this much thought in relation to this proposal, and that is entirely consistent with their longstanding hostility to undertaking gender analysis of Treasury proposals. The proposed changes will affect women differently. Women who have broken careers because of caring responsibilities would be more likely to fall into one of the categories affected by these changes. The gender gap results in a super gap, and this means that women are more likely to have a low superannuation balance. Similarly, women who take time away from the workforce to have children or to deal with other caring responsibilities are more likely to have inactive superannuation accounts because they are not working and contributing at that time.

Women in Super provided a useful anonymised case study in their submission to the Senate inquiry. Fund A is a large industry super fund. Let's have a look at the cohorts of people in this case study affected by the government's proposal. Members under 25 pay $34 a year for their death and long-term disability income protection insurance—$34 a year. The protection is being used, a claim on this super fund is being paid out, every 12 days on average. So the capital investment, the money invested to purchase this cover, $34 a year, is being used. Every 12 days someone makes a claim.

The fund in question has over 177,000 active members with a balance under the $6,000 threshold. And, surprise, surprise, 75 per cent of those members with a low balance are women, because that is entirely consistent with what we know about the operation of the superannuation fund. Their average age is 36 years old, and the majority of them do have dependent children. Through the arrangements proposed, these members could lose their entitlement to over $500,000 in combined default death and long-term disability protection. In this case study, it takes these members of this fund an average of two years of working to reach a superannuation balance of $6,000, the threshold that's proposed in this legislation. It reflects the low wages in the industry that this fund services. It has 177,000 active members on low wages, and, yes, it's taken them two years to get to $6,000.

Members risk not having proper insurance cover during the period that they are accruing this minimum balance. Like most people, the majority of these members do not have personal insurance outside superannuation and, if they did so, it would be significantly more expensive than what is made available in this fund. Due to demographic factors, many of these members never reach a superannuation balance of $6,000. This isn't dealt with in the way that this bill has been constructed, nor in the way that it's been debated by the government, and the different interests of women in our retirement system continue to be ignored by the government, as indeed do the different economic interests of women more broadly.

I'd like to conclude by briefing touching on the Liberals' record on super. The government has called this bill 'putting members' interests first'. It's a bit of a novelty for the Liberal Party to acknowledge that working Australians have a legitimate interest in superannuation, let alone that members' interests should be put first. Close to 24 years ago, to the day, on 25 September, the member for Warringah, Mr Tony Abbott, told the parliament:

Compulsory superannuation is one of the biggest con jobs ever foisted by government on the Australian people … The government is making us worse off now so that it will be better off in the future.

Well, almost 24 years on, to the month, the Abbott government went on and struck a deal with the Palmer United Party to freeze compulsory superannuation contributions at 9½ per cent for seven years.

The Liberal Party's war on superannuation is not a thing of the past. When this legislation was put up for debate in the other place, Liberal members of parliament were putting the case again that we should cancel those delayed superannuation increases. These are the increases which are supposed to be guaranteed by legislation and due to take place between 2012 and 2025. We heard Senator Bragg use his maiden speech in this chamber to call for superannuation to be voluntary for low-income earners. The Liberal Party seems to think the only way to increase wages for Australians is to slash their retirement entitlements. Well, in fact, there is another way. There is another way they could be approaching this. They could have a wages policy, they could have a plan to stimulate growth and productivity, they could acquire an energy policy after six years of total failure in this area and they could just get a plan to govern.

The Labor Party take a very different approach. We know that we can increase wages for working Australians and provide them with more superannuation. We have always stood up for the rights of workers to get a fair deal on their superannuation. It was Labor that introduced compulsory superannuation and Labor that defended it from the coalition's repeated attempts to undermine its universality. That is because we believe that every Australian deserves to retire with dignity and independence and that our superannuation system is critical to that goal.