Alex Gallacher (SA, Australian Labor Party) | Hansard source

I rise to make a contribution to this important debate on the Treasury Laws Amendment (Putting Members' Interests First) Bill 2019. I want to say at the outset that I do have an interest. I go back to superannuation in 1986, when there was an industrial campaign run by many unions around Australia to put in place superannuation for workers who didn't have any—nothing at all. They had no death cover, no TPD, no retirement savings at all. So that was long time prior to it becoming compulsory.

I want to take up a couple of points that Senator Bragg has made. Basically, there are a number of ways that you can further the retirement incomes of people in superannuation. You can make super be paid on time, for starters. You can make super be paid at the same time as wages. That would force people to make a contribution on time and in full, and bump up retirement incomes. You could make sure they have actually paid the right amount of super. The tax office indicates that there is about $2.7 billion worth of unpaid super, as a guesstimate. They look at their records, at what should be paid and what has actually been paid, and there is a $2.7 billion shortfall. But, no, the workers' friend, the coalition government, has decided to take a very small slice of the industry and say, 'People under 25 don't need insurance.'

If you think of bespoke insurance, which Senator Bragg alluded to, as being the solution for families, I'll give you a short story. Looking at my industry fund this morning, I will pay $124 worth of contributions per year for life cover of $34,000. Now, were I to go to a retail fund and try to get any insurance at my stage in life, I'd be paying a lot more than $125 a year. I'd probably be paying $125 a week. So group life insurance is not a bad thing. It is not a bad thing per se. If you take 1.2 million customers to the marketplace and say, 'Here are the assessments of death, TPD and the like; what's the best premium you can give us across 1.2 million members,' you're going to get a very competitive product. If you take 1.2 million customers individually to a retail fund, you're going to see a vastly higher premium. And there is evidence to that effect. The Rest superannuation fund will say, 'On average, you're getting insurance for life and TPD for $1.11 a week.' A comparable retail product is $8 a week. Last time I looked, that was 700 per cent more.

The argument, simply put, by those opposite is that people do not need insurance or TPD if they're under 25. Well, that's not the world I live in. The data that Senator Hume has used is Taxation Office data which says they do not have dependants. At 25, they may not have children; that's true. But they may well have a 'better half', a partner. They may well be living with a grandparent. They could be sharing with any number of family members. In the event that something awful happens, such as death or injury, there are expenses to be met. I know this from having sat for 10 years on a claims committee, where we routinely dealt with up to 30 deaths per month, including death by suicide, misadventure and the like. Quite often, the funds that were paid out in those circumstances were the only amount available to recompense the people who paid for the funeral costs or to assist those people over that very difficult time that they were having on their life journey. I don't subscribe to the idea that this is a rip-off. In fact, if you look at the submission from Women in Super to this inquiry, you will see a case study. This is the case study:

Fund A has 177,742 active members with a balance under $6,000. Approximately 75% of these members are women. Their average age is 36 years old. A majority of these members have dependents. Under the proposed changes, these members will potentially lose … $500,000 in combined default death and long-term income protection.

It takes members of Fund A approximately 2 years to reach a superannuation balance of $6,000 – this reflects the industry sector Fund A services, and the low wages … Like most people, a majority of these members do not have personal insurance … outside superannuation.

Due to demographic factors, 6% of members of Fund A never reach a superannuation balance of $6,000. For these members, the insurance component of their super is far more valuable than the additional retirement benefit that would have accrued—

if they didn't have insurance.

The disparity between income earning potential is abundantly clear—women do it a lot tougher in superannuation than men. Time out of the workforce, lower pay, more casual work and the like means that, quite often, life insurance, TPD and the like are valuable to these women during their working career. In fact, they're not likely to get, as Senator Bragg alluded to, a funded over-pension retirement income. It's just not going to happen. It's going to be of some funds, if they're lucky, which will assist them in combination with the age pension. That's the future they're looking at, because you need to be contributing a lot more than your current level of earnings to fund your retirement over the age pension. That's exceptionally clear.

There are a lot of people in these industry funds for whom life insurance and TPD is extremely valuable. It's a safety net. Is it expensive? No, it's not extraordinarily expensive. If you look at the largest fund which covers young people, Rest Super, they have approximately 480,000 members who will lose their insurance coverage if these changes go through as is. They maintain that the group insurance can be designed to not erode balances. For example, members at 20 years of age pay $82 per annum and get income protection benefits of $1,650 per month, a TPD benefit of $28,000 and a death benefit of $50,000. Claims are being paid. Rest alone paid $530 million in the last five years to around 3,800 members with balances below $6,000 and around $115 million to around 1,200 members younger than 25 years of age. So clearly it's not a one-way street here.

Senator Bragg pointed to the Grattan Institute, CHOICE and the Productivity Commission. But the reality is that it is a really white-collar view of the world. Workers in low-paid service industries have complicated relationships—with their family and with other people around them. They may not have the two children I had at 25 years of age, but the reality is they have commitments and they are still vulnerable to shock in the event of death or TPD. I think if you ask them, genuinely and openly: 'Are you happy to pay 80 bucks a year to have this coverage?' an extraordinarily high number of people would say yes.

The real problem we have here is disengagement with the industry—disengagement of workers, but not just young workers. I can point you to workers in this parliament who have been in good, high-paying jobs for a long time who haven't bothered to go and have a look at their super scheme and what it entails, what it entitles them to and how much they're paying in fees and costs. We're trying to protect the younger cohort from a diminution of their retirement through the removal of a very clear and concise benefit. I would say at the outset, having been a trustee director, having chaired an investment committee, having sat on an industry super fund board for quite a number of years, that I always acted in the best interests of members. They didn't always know I was acting in their best interests, because they never asked or they never looked or they never checked. But, when tragedy befell them or things happened and they put in a claim and got paid, they were extraordinarily thankful.

If the government were fair dinkum about protecting members' retirement income into the future, it would, as I say, ensure that the right amount of super is paid. The Australian Taxation Office states that it has estimated 'the difference between the value of super guarantee contributions required to be paid under the law and actual super guarantee contributions made'. For the year 2015-16, the ATO estimated the net gap—which is the gap taking into account the impact of the ATO's compliance activities—to be $2.79 billion. That is vastly more than what we're seeking to save workers from—82 bucks a year.

I know that those on the other side would like to say that they're on the side of workers. Well, I've got a little bit of history regarding superannuation. They have opposed superannuation every step of the way. It was unions that fought for it industrially. Never forget that. Unions took the campaign to employer groups and created superannuation funds. It was the Keating government that extended that across the whole workforce. But, for about six or seven years, this was an industrial campaign—worth fighting for and delivered on the job, and people put their shoulders the wheel. Industry funds were formed. The royal commission found, in my humble view, that the retail funds were where the bulk of the problems were. If you go down this line of forcing people to opt in, you are going to disenfranchise a whole lot of people who are currently covered—they probably don't know it; I accept that. A lot of them wouldn't know it. There is a not insignificant number of people with dependants. The ATO figure is that 3½ per cent of people between 15 and 24 are living with children. Where do they go for cover? What happens to them? Do they just hope, as Senator Whish-Wilson or Senator Bragg said, that they might be covered by workers compensation? I'm not sure that that's a fair analogy at all—in fact, I'm sure it's not.

This is flawed legislation. I think it is designed to move retail funds back into the picture. I can quote some interactions my office has had where a worker in a retail fund is actually paying $1,800 a month for life insurance. I won't give you the details of that fund or that person, but it's the classic retail modus operandi. The president of a football club or some sporting group is an agent; everybody knows that they're a good boy or a good girl—they look after you. You know they get a commission, because that's how they get paid. When it all unravels and you see that a person with a modest amount of money in a retail fund is actually paying more for his insurance than his entire contribution to the fund, the answer is: 'Well, he should read his fund prospectus. He should read the detail.' Workers aren't reading the detail. Retail funds are not the solution here. The solution is a careful evaluation of the real risks we're imposing on this section of the community.

My contention, particularly from a transport perspective, is that young workers are vulnerable. They are vulnerable in any number of ways. They're vulnerable in accidental death and they're vulnerable in terms of intentional self-harm—and those are certainly the statistics we've seen through the years of involvement with the transport superannuation industry. To get a group life insurance cover in our area that was respectable was extremely difficult because we had a high rate of death, we had a high rate of injury and we had a disparate group of members. We had to get a collective group insurance policy that got it up. I can remember when the death cover in the TWU was $32,000. That was the best we could get, based on our claims experience. It's much higher than that now, and you can go in and purchase additional levels of cover.

What hasn't been said in this debate but should be said is that all of these group life insurance premiums are deductible. They're deductible by the funds against the 15 per cent contribution tax. There is a forward estimate of the savings that this government, or any government, will make by eliminating this cover, and they're in the hundreds of millions of dollars.

What's been put to me is that if you simply excise 15- to 24-year-olds and those on a $6,000 or less balance from the cover what you're quite probably going to do is increase the cover for those aged 24 to 55, 65 or 75 or whatever people work to. The savings that are going to be banked in the forward estimates may well evaporate because the group life insurance premiums for a fund—and I've been quoted this figure by one fund—will rise by 14 per cent. So the members of the fund will not see any net saving anyway. You will not be covered until 25, and when you get to 26 you're going to pay a 14 per cent higher premium. How does that make any logical sense? It only makes sense if you're batting for the retail funds and bespoke insurance, and I'm certainly not doing that. I'm batting for group life insurance for the widest possible membership at the best possible price that, in aggregate, delivers the best outcome for workers. There is a very simple test that you need to prescribe: 1.2 million members with a disparate age groups and diverse occupations going to market to get a group life insurance policy that covers the whole group versus 1.2 million people going to the marketplace and trying to deal with their individual circumstances.

At one point in my life I sought a higher level of cover. I had every medical test known to medicine, basically. I paid a doctor to write up a very comprehensive report and, after careful checking that I had no existing frailties or injuries and that I hadn't smoked for 10 years and all that sort of stuff, I was grudgingly offered a bespoke policy. That's fine. You can choose to go down that path. But we've got a system now that's not broken.

There are at least 3½ or four per cent of the workers in this area, by Senator Hume's own analysis, who have dependants. My question in the committee stage will be: what replaces the existing cover for those people who have dependants? The next question will be: in your forward estimates, if you're going to make some savings on tax deductibility of group life insurance premiums, have you factored in the fact that premiums may raise by 14 or 15 per cent? If they do, your savings will evaporate. They will go straight out of the window.

These are early days in a very complex piece of legislation. We know from the Treasurer's remarks that there are going to be another 42 pieces of legislation coming through the economics committee. All of them will have a good testing in this chamber and all will have a result, one way or the other, and I'm happy to abide by that. I do want to put this clearly on the record: this was the first bit of legislation to come to the economics committee. It came through the selection of bills process with a reporting date of 19 October and a commencement date of 1 October for the legislation. It would be pretty hard, I would have thought, to report on a piece of legislation with an operating date 18 days before the reporting date.

I said to the chair, Senator Brockman: 'Can we have a hearing in Canberra? Can we get the crossbenches involved? Can we get some evidence?' 'No, we can't do that.' I said, 'Why?' He said, 'This has all been thrashed out in a previous parliament. I said, 'No, that's not exactly correct. It didn't get up in a previous parliament. The issues are still live. They need ventilating. You need to get people together and give people the opportunity to refresh themselves in this new parliament.' And we were denied that access. The government used its numbers and said: 'No hearing. It's all good—ready to go.' Well, unfortunately, that's not true.