Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

The Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2012 seeks to implement a recommendation of the Cooper review into Australia's superannuation system to introduce a new, low-cost superannuation product known as MySuper, which will replace existing default superannuation fund products. Madam Acting Deputy President Boyce, we were involved together in the Parliamentary Joint Committee on Corporations and Financial Services inquiry into this particular bill, so I know that you are also very familiar with the issues I am about to address.

Let me say at the outset that the Gillard government's handling of this reform—which, incidentally, we in the coalition have supported in principle from the outset—has been a complete shambles. In particular, Minister Shorten's handling of this has been all over the place. It has been disjointed and ad hoc—a change here, a change there. Instead of a strategic approach, we have three tranches of individual pieces of legislation. Rather than being able to deal with the MySuper reform package as a whole, the government has been introducing it in a piecemeal fashion. In the last sitting fortnight, the government insisted that two bills had to be joined together so they could be dealt with by the Senate. Earlier this week, they decided that was not a good idea after all and it had to be split again. We said right from the beginning that, given the way the government had introduced the bills, it was never going to work in the way they proposed. One minute they wanted to rush it, then they wanted to delay it, then they wanted to rush it again, and then they wanted to make another change. Along the way they failed to properly consult with key stakeholders, who are of course at the receiving end of all of the chopping and changing arrangements, and there are significant implications for the way they run their systems. Those implications are ultimately very costly for the Australians we are trying to do the right thing for by helping to create the most efficient, transparent and competitive superannuation system possible. So, let me say right at the outset that the government's handling of this very important reform has been nothing short of utterly incompetent.

The coalition will be moving some amendments to this bill to address a number of concerns that we have, in particular in relation to the need to improve the definition of the large employer threshold and also in relation to replacing the additional authorisation requirement for funds with a reporting requirement to APRA. We would also have liked to have used this opportunity to ensure that any MySuper product, which will ultimately be the legislated default product, could compete freely in the default fund market, but we have been given technical advice that we will have to do that in the context of a future MySuper bill, given the way this current bill has been structured.

We commend the amendments that I am about to put to the chamber. If they are not supported, the coalition will not ultimately stand in the bill's way and we will not oppose it. This bill defines the MySuper product. It limits the regulated superannuation fund to offering only one MySuper product, except in certain circumstances. It allows registrable superannuation entity licensees to apply to the Australian Prudential Regulation Authority for authorisation to offer a MySuper product and it sets out various rules on the payment of contributions and account transfers for MySuper products. It also sets out the fees that can be charged and the basis on which those fees can be charged to members of a MySuper product.

I add that the MySuper design contained in this bill is quite different from the original government proposal. I commend the government for reconsidering what they initially thought they wanted to do. The original proposal would have imposed uniform pricing across all MySuper products, which would have had the very counterproductive effect that hundreds of thousands of Australians would be forced into default funds that charge higher fees than the funds they are currently in, which would not have been the intention. By making the sorts of changes that we have promoted for some time, by removing the approach of uniform pricing that the government were pursuing, we will make sure that the risk is somewhat reduced, although we still have some concerns with one of the subsequent MySuper bills, so there is a bit more to be done in this area.

Under this bill, from 1 October 2013 employers must make default superannuation contributions for employees who have not chosen a fund to a fund that offers a MySuper product. However, it does not open the default fund market to competition and choice. Of course, this is a real indictment on the current government. The process by which default funds are currently selected under modern awards is a real indictment on this government. It is a process that was established by the government through Fair Work Australia. It is an anticompetitive, closed shop arrangement which is littered with inherent conflicts that ultimately act to the detriment of people in superannuation. Only if we have a truly competitive, a truly transparent and a truly efficient system will retirement returns for people in superannuation funds, including default superannuation funds, be maximised.

The bill also introduces the concept of intrafund advice, favoured by industry super funds, in a way which we believe is inconsistent with the government's stated transparency objective in the Future of Financial Advice changes. However, since this legislation was first introduced some time ago, the government has acted to provide some clarification around how the intrafund advice provisions are to operate. At this stage we reserve final judgement, until we get some further clarity around all of this.

The coalition have consistently supported any changes which make our superannuation system more efficient, transparent and competitive and which improve value for super fund members. We have been concerned that the initial MySuper proposal to design a superannuation product and impose uniform pricing through legislation would have created unnecessary inefficiencies and left many consumers worse off. The best way to maximise value for consumers across all parts of the superannuation value proposition—that is fees, fund performance and service—is to maximise competitive tensions in an appropriately transparent system. Low-fee, no-frills products are already available across both retail and industry superannuation funds without the need for legislation. Research from Chant West found that, under the initial one-fee government mandated model, over 750,000 Australians would have been forced to pay higher fees than they currently pay.

There has been extensive debate in the sector around these issues over the past 12 months, and the government has now backed down from its original proposal to impose such a uniform fee structure as part of its MySuper proposal. The government's proposal now is to allow MySuper funds to offer differentiated fee structures. We are still concerned, though, that the creation of a MySuper product through legislation is an unnecessary interference in an existing, highly competitive market for low-fee, no-frills superannuation products. However, what is proposed now is certainly much better than where we started a year ago.

There are some issues that the bill fails to address, and I will just go through some of them in turn. As to default funds, this bill mandates that from 1 October 2013 only MySuper products can be used by employers to make default superannuation contributions for employees who do not have a chosen fund. However, as I have mentioned before, the government has not made any attempt to address the current closed-shop, anticompetitive arrangements for the selection of default funds under modern awards. The recent process through the Productivity Commission was completely compromised when Minister Shorten—in quite an unprecedented intervention, for him—effectively responded to the Productivity Commission report before it had reported. He effectively responded to the Productivity Commission review of the selection of default funds under modern awards and other matters before the Productivity Commission had actually reported. In doing so, he placed a lot of pressure on the Productivity Commission and, quite unsurprisingly, the final report and recommendations were quite somewhat weaker than the original recommendations that had been made by the Productivity Commission in its draft report.

In its initial draft report the Productivity Commission was quite keen on ensuring genuine competition in the default fund market, but the final recommendations on the back of the minister's intervention were much less far-reaching and, we would argue, far less adequate. But even those weaker recommendations by the Productivity Commission have not been adopted by the government. So not only did it take Bill Shorten forever to get around to asking the Productivity Commission to look at this important issue, and not only did the minister intervene in the process in an unprecedented fashion by effectively responding to the review before it had reported, but now the government has introduced legislation into parliament which, instead of ensuring genuine competition, will impose an additional layer of government intervention on the default fund market. The government is also seeking to limit the number of MySuper products in modern awards to just 10—contrary to the clear recommendation of the Productivity Commission, which was that there should be an unlimited list of default funds.

In fact, the government has ignored the Productivity Commission's findings in a number of key areas. The Productivity Commission has proposed that the default superannuation panel will not be created as recommended; rather, it will be subsumed in the existing minimum wage panel. But the new panel is not the final decision maker under this bill, as recommended; the full bench of Fair Work Australia will approve default funds in each award after recommendation from the expert panel. But the process of including funds in awards will only occur every four years, starting in 2014 when modern awards are due for review, as opposed to an ongoing application process. And all awards must have default funds. Currently there are 13 awards that do not list default funds.

Genuine competition in the default fund market is critically important to ensuring that efficiencies and value for Australians in default super are maximised, which of course is supposed to be the objective of this bill. This legislation, and the other pieces of legislation that are supposed to come along with it, are really designed to enshrine in legislation the consumer protection mechanisms that the government judges are necessary for default super fund products. Once those consumer protection mechanisms are enshrined in legislation, there is no reason that those products which qualify for registration as MySuper products should not be able to compete freely in the default fund market. The only reason the government is not all that keen on letting that happen is that the current government and the current minister in particular are very keen to continue to protect the vested interests of a particular segment of the superannuation industry, which happens to be very close to the union movement.

I would just make the point here, on the record, that we will be moving amendments to the other bill, which has now been disjointed from this bill and which will no doubt come to the Senate sometime next week, to ensure that there is genuine competition in the default fund market and that any MySuper product can compete freely in that market. If those amendments are unsuccessful—and given that the current government is clearly not prepared to do what needs to be done to ensure genuine competition in the default fund market for the benefit of people in superannuation—then a future coalition government will do exactly that. A future coalition government will make sure that there is an open, transparent and competitive process and that there is genuine competition between all and any products that qualify for registration as a MySuper product.

Let me make the point here that competition is important not just between individual businesses or between individual superannuation funds; competition is also important between different business models. The industry fund business model clearly has some attractions to it, and some downsides. The retail fund business model also has some attractions to it, and it might have some downsides for certain people in certain circumstances. It is the same with a self-managed super fund. Not every avenue is right for everyone. But in a system that is appropriately transparent, open and competitive, people can make choices, and the choices that people are able to make drive innovation and maximisation of value for people who ultimately aspire to get the best retirement savings returns possible.

We did have some concerns in relation to the intrafund advice provisions in this bill. The explanatory memorandum indicated that superannuation funds would be able to charge for expenses incurred in the provision of intrafund advice as part of the overall administration fees charged to all fund members of a MySuper product. Neither the bill nor the explanatory memorandum defined what 'intrafund advice' was, and there was no definition of this term in any existing legislation. The explanatory memorandum foreshadowed that the term would be defined in subsequent legislation but, of course, in recent times there has been some effort in relation to the term 'intrafund advice' in particular through ASIC.

We agree with the government when they say that people should not be paying for advice that they do not get and that people should not be forced to pay for advice that is provided to others. In the context of this legislation, why should fund members be forced to pay for personal advice that is accessed by some members but not all? Why should people be forced to pay through the administration fee for the personal advice that is provided to some individual members of a fund but not to all? There was a need to clarify some of these arrangements and some of that work has been done.

In relation to the large employer threshold, there was significant concern expressed to the Parliamentary Joint Committee on Corporations and Financial Services, which inquired into this bill, about the benchmark above which large employers can tailor funds for their employees. The provisions of the bill allow for such tailoring where an employer contributes to a fund on behalf of 500 or more members. Many participants in the superannuation industry submitted to the committee inquiry that the threshold in its current form is 'complex, unworkable and may have a number of unintended consequences.' The coalition will move amendments to seek to amend the bill by replacing this complex and unworkable threshold with a simple, easily quantifiable and effective test that defines the large employer threshold as an employer that has 500 or more employees at the relevant time.

In relation to reporting large employer funds to APRA, the bill as drafted will require a superannuation fund with a MySuper licence to apply to APRA prior to providing superannuation services to each large employer. The superannuation industry has argued strongly and very effectively that the additional authorisation process for tailored MySuper products for large employers is unnecessary, given that all funds offering such tailored plans are already authorised to provide a MySuper product. The superannuation industry has pointed out that this is an additional process which would be cumbersome, time-consuming, unnecessary and costly—with those costs ultimately borne by people in the MySuper funds. They also express strong concerns that this additional authorisation process would move APRA away from its proper and very important role as a prudential regulator focused on risk and governance into areas of commercial interest between funds and large employers which have nothing to do with its regulatory role. If this provision is not amended, fewer Australian workplaces will have super arrangements which reflect their specific employees' needs. That, of course, would be a very concerning development. Australians would have a reduced suite of products in a less competitive market and further unnecessary costs and regulation would be introduced into the financial services industry. So the coalition will move amendments that would require superannuation funds to report the existence of these arrangements rather than apply to APRA prior to issuance.

We believe that one licence to operate a business in any industry is sufficient. The amendments would still allow APRA to disallow a noncomplying fund. Such a process would address the public policy concern that the existence and number of employer plans is unclear to APRA. It would require regular reporting without undermining the efficiency, competitiveness and commerciality of tender processes. The coalition amendment would also ensure that APRA continues to fulfil its proper role as a prudential regulator which should be focused on risk and governance, without entangling it in commercial matters which affect neither factor.

I would like to quickly clarify the coalition's position in relation to a Greens amendment in the House—the amendment in relation to so-called 'flipping'. The amendment has created a prohibition on moving an individual's investment from a tailored MySuper product to another, without a member's consent. We are concerned that costs in large-employer MySuper schemes would be higher, as they would have to deal with the inefficiencies implied in having to retain and deal with ex-employees. The coalition did not support that amendment. However, it was clear that Mr Bandt had support from the government and other Independent members of the House of Representatives that would secure passage of the amendment through parliament. In light of this, the coalition did not call a division on the amendment.

As I have mentioned, the handling of this whole package of bills has been disjointed, ad hoc and, frankly, incompetent. It is a real shame. (Time expired)

Catryna Bilyk (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

Back in June, I made a contribution on the Superannuation Legislation Amendment (Stronger Super) Bill, and I made certain important points that I will quickly revisit, because they go to the core of what the Gillard Labor government mean to achieve with our Stronger Super reform package.

We all know that compulsory retirement savings are a relatively recent phenomenon in this country; but, since their introduction by the Keating government in 1993, they have become a significant feature in our economic and social landscape. In my contribution earlier this year, I recognised that Australia has the world's fourth largest pool of privately managed funds, with total savings of some $1.4 trillion. Of course, the goal of these funds is to maximise retirement savings for workers, and this was the purpose of the 2009 Cooper review of superannuation which ultimately led to the Stronger Super package of reforms. I would like to quickly recognise that it was my Tasmanian colleague—and Senator Brown's Tasmanian colleague as well—the now-retired Senator Nick Sherry who initiated the Cooper review. I am sure Senator Brown joins me in acknowledging Senator Sherry's passionate advocacy for superannuation for working Australians.

The bill I spoke on previously was about a component of the reforms, the SuperStream system, which made the process of everyday transactions in the super system easier, cheaper and faster. Stronger Super also includes reforms that will improve the governance and integrity of the superannuation system and will improve integrity and increase community confidence in the self-managed superannuation fund sector.

We know we have an ageing population and, consequently, an increasing need to fund the retirement savings of the next generation. That is why, in addition to the Stronger Super reforms, we have committed to increasing the compulsory employer super contribution from 9 to 12 per cent. This is a reform which will have a significant impact on the quality of retirement for Australian workers, and it is one that is desperately needed to support Australia's ageing population.

One of the recommendations that came out of the Cooper review was to introduce a simple, low-cost default superannuation product called MySuper. Mr Jeremy Cooper, the Chair of the Super System Review, put it well in an article he wrote for the Australian Financial Review, published on 20 April 2010. He wrote about removing the 'bells and whistles' from super products. The Cooper review engaged Deloitte Actuaries and Consultants to provide an estimate of reasonable and achievable total costs for an average fund member with a $25,000 account balance assuming the adoption of the MySuper model. Nearly all of today's default fund members are paying more than the fees projected by Deloitte. In fact, some members are paying twice these amounts.

The reality of the superannuation industry is that while having a choice of funds is good for competition, many fund members take little interest in their superannuation until they are nearing retirement. Investment options and fee structures for superannuation funds can be complex, and it is rare for fund members to seek expert advice in relation to their investment.

The Cooper review found that there are low levels of financial literacy regarding the superannuation sector, and the majority of Australians are disengaged from their super investments. The review did recognise that there are some Australians who are actively engaged with their superannuation investments. However, our compulsory superannuation system does not cater for the different levels of engagement, particularly for those fund members who do not choose their fund or take an active interest in their super. The MySuper product caters for those fund members, to stop them paying for the bells and whistles. Another way of putting is that we are helping people avoid paying for a Ferrari when all they want to do is drive a Commodore—or a Ford, depending on which car you prefer.

The Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2012 establishes the core framework for MySuper, through amendments to the Superannuation Guarantee (Administration) Act 1992 and the Superannuation Industry (Supervision) Act 1993. MySuper products will replace existing default investment options in default funds from 1 July 2013.

The bill requires the Australian Prudential Regulatory Authority, or APRA, to be satisfied that a MySuper product has some core characteristics—namely, that there is a single, diversified investment strategy, which can be a lifecycle investment approach; there is equal access to services for all members; the same process is used in allocating investment returns to members; no limits are placed on the contributions that a trustee of a MySuper product will accept; and a member cannot be transferred out of the MySuper product unless the member consents, or if it is required by a Commonwealth Law.

Trustees of superannuation funds will be required to be authorised by APRA for each MySuper product they wish to offer. APRA will be able to accept applications for MySuper products from 1 January next year. Trustees will be restricted to one MySuper product per fund; however, there are two exemptions to this rule. The branding goodwill exemption will allow merged superannuation funds in which there was material branding goodwill prior to the merger to maintain their existing brand names and continue offering different MySuper products. The large employer exemption will allow funds to offer a tailored MySuper product to employers that contribute to the fund for the benefit of at least 500 employees and associates to suit the needs of the particular workplace.

Funds will be required to charge all members the same set of fees for a MySuper product. However, some employers will be able to negotiate a discounted administration fee for their employees in the generic MySuper product. This will allow trustees to provide more flexibility to certain employers and will result in some members not being forced to pay higher fees as a result of the introduction of MySuper.

A government amendment to the bill responds to concerns raised by trustees who operate a lifecycle investment strategy. While these employees will be placed into a MySuper product by default, it is important to emphasise that we are not taking away choice for those employees who wish to exercise it. If any employee wishes to have more than the basic level of service that a MySuper product offers they simply need to make the choice that is available to them. And those who choose to exercise even more control over their superannuation can set up a self-managed superannuation fund.

MySuper products can now have different investment fees within a lifecycle investment strategy provided that APRA is satisfied that certain criteria are met. The criteria 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 in the lifecycle. The product may charge no more than four investment fees through the lifecycle. The benefit of a lifecycle investment approach is that it varies the risk over different stages of employment. While employees in the early stages of their career may be willing to take on higher levels of risk for higher long-term returns, they may choose to reduce their risk as they approach retirement so they have greater security in their investment, particularly to insure against events such as the global financial crisis.

The bill also provides for a uniform fee structure. MySuper products will be restricted to charging fees that are described in the same way so that they can be directly compared. I would just like to mention that, when the Howard government introduced the ability for workers to choose their superannuation fund in 2005, very few workers exercised that choice because the fee structures were so complex that it was difficult to compare funds. Some of the fee disclosure documents were between 50 and 100 pages long. Competition between superannuation funds is a laudable aim, but, given the complexity of financial decisions it is important that consumers are able to make ready and easy comparisons between products. Only then can there be true competition between superannuation funds, and that is what a uniform fee structure between MySuper products will achieve.

Of course, the other important component of competition is the ability to compare products, so I am pleased that APRA will be collecting data on all MySuper products and making this information freely available by publishing it on its website.

I have summed up the elements of the MySuper reforms dealt with by this bill. There are some remaining elements of MySuper, including enhanced trustee duties, insurance arrangements, and disclosure, which will be dealt with in subsequent legislation. I note that the bill currently before the Senate was subject to an inquiry by the Joint Committee on Corporations and Financial Services. There were a number of peak organisations who submitted to the inquiry in support of the MySuper reforms and these included the Industry Super Network, the Financial Services Council and the Australian Chamber of Commerce and Industry—and, as we know, ACCI are not often great supporters of initiatives of this government.

I will just read a short statement from Industry Super Network's submission, which I think highlights one of the shortcomings of the Howard government's superannuation choice policy:

… superannuation, regrettably, does not operate like a competitive market where consumers make informed and active decisions to place their savings with the best performing funds ... Without active engaged consumers there is little incentive for providers to strive to offer the best possible product delivering the best possible returns.

In the last few seconds that I have remaining I would just like to say that, in an economy like Australia's where we have the wealth and therefore the means to provide what most Australians dream of after a life of hard work and paying taxes, a comfortable and dignified retirement is what everybody should be entitled to. This bill will help people to realise that outcome.

Matt Thistlethwaite (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I support the passage of the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2012. There are many economic legacies of the Hawke and Keating governments, but probably the most significant economic legacy in terms of advantages and changes to the lives of ordinary Australians is in the form of compulsory superannuation. We now have a $1.3 trillion investment fund—a pool of savings that not only businesses and investors but also workers, employees and their families can rely on to grow our economy to provide security and safety in retirement.

Congratulations to Paul Keating for his foresight as Treasurer in establishing our superannuation system. The bill before the Senate today builds on that great legacy and tradition of providing strong superannuation legislation in this country and it delivers on the government's 2010 election commitment to introduce a new, simple and low-cost default superannuation product for employees, MySuper. It is a key part of this government's Stronger Super reform package. Other reforms also include processes to make everyday transactions to the super system easier, cheaper and faster through the SuperStream package of measures, improving the governance and integrity of the superannuation system and improving the integrity of and increasing community confidence in the self-managed superannuation fund sector.

Stronger Super also complements the government's historic commitment to increase the superannuation guarantee from nine to 12 per cent. MySuper will provide a simple, cost-effective default product that all Australians can rely on. MySuper will be limited to a common set of features that make it easier for members, employers and other stakeholders to compare the performance of funds across the MySuper product range. Ultimately, that will place downward pressure on fees and will promote engagement and a greater understanding of superannuation in our economy.

This bill amends the Superannuation Guarantee (Administration) Act 1992 and the Superannuation Industry (Supervision) Act 1993 to establish the core framework for MySuper products. MySuper products will replace existing default investment options in default funds, from 1 July 2013. MySuper products will have a simple set of product features, irrespective of who provides them.

Therefore, the bill requires APRA to be satisfied that a MySuper product has some core characteristics. These characteristics are: a single, diversified investment strategy, which can be a life cycle investment approach; equal access to services for all members; the same processes are used in allocating investment returns to members; no limits are placed on the contributions that a trustee of a MySuper product will accept; and a member cannot be transferred out of the MySuper product unless the member consents or if it is required by Commonwealth law.

A trustee will also have to demonstrate that they are able to meet new obligations to act in the best financial interests of the members of the MySuper product. These obligations are outlined in other tranches of legislation that have been before this parliament.

The bill also establishes the authorisation regime for MySuper. 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 MySuper products from 1 January 2013. I note that a number of funds are beginning to establish MySuper style products and to promote them in the marketplace. Any trustee will be able to apply to offer a MySuper product except trustees of eligible roll-over funds, self-managed superannuation funds and APRA-regulated funds with fewer than five members.

APRA will generally only authorise a trustee to offer a single MySuper product in a superannuation fund. However, trustees will also be able to offer employers who contribute to the fund for more than 500 employees a separate MySuper product tailored to the needs of that particular workplace. These products will be able to differ from a fund's main MySuper product in terms of investment strategy, member services and fees. These MySuper products must be separately authorised by APRA.

Minister Shorten has acknowledged 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, upfront 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 started to receive 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 have to find another default fund at very short notice and causing the superannuation of employees to have to be moved to a different superannuation fund.

APRA has started to 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 between the tailored product and the already authorised MySuper product. As such, 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 considers that this approach strikes the right balance between certainty for employers and employees and a smooth and functional application process for trustees.   

Minister Shorten has asked Treasury to conduct a review of the authorisation process within two years of the commencement of the MySuper regime and 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.

From 1 January 2014, it will be mandatory for all employers to make contributions to a fund that offers a MySuper product for any employee who has not chosen a fund. This will provide employers six months to ensure that they are able to select a default fund that offers a MySuper product to comply with the superannuation guarantee obligations.

MySuper products will be restricted to charging fees that are described in the same way so that they can be directly compared. APRA will collect and publish data on all MySuper products to ensure that this information is freely available. Members of a MySuper product will also be generally charged a single fee structure. This will enable members, employers and market analysts to make comparisons based on the actual fees paid by the member in each MySuper product. In addition, requiring the same fees to be charged to all members will place a competitive pressure on trustees to offer the best possible fees to all of their members.

However, a trustee will be able to charge a lower administration fee to employees of certain employers reflecting administration efficiencies for the fund in dealing with that employer. Further, APRA will be able to authorise MySuper products with different investment fees within a lifecycle investment strategy if it is satisfied that certain conditions are met. Those conditions are: that the investment fee charged to each member of an age cohort is the same; that there is a maximum of four age cohorts and therefore no more than four investment fees; and that the investment fees for the age cohorts reflect their fair and reasonable attribution to 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 lifecycle.

I conclude by making some comments about the points raised by Senator Cormann regarding default funds and their listing within modern awards. The fact is that these reforms do not affect choice of superannuation fund legislation. Employees maintain the discretion to choose which fund they wish to have their superannuation contributions made to. That means when they go to the employer they receive an employment declaration and their choice of superannuation fund form.

The opposition has an issue with industry superannuation funds because—and this is really the crux of the matter—most employees choose to remain in industry funds because the fees are lower, commissions are lower and the performance is greater. That is a product of the system that has been established by a Labor government, a system that the opposition wishes to try to tear down. It has never got over the fact that it never appreciated the significance of superannuation and never initially supported its establishment and cannot get over the fact that superannuation funds that are run by unions, with trustees on those boards, in cooperation with employer associations perform better than most corporate funds.

On that basis, this is a worthy reform in the great tradition of Labor delivering better superannuation and better retirement savings for our economy. I comment the bill to the Senate.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I thank all senators who have participated in this debate as it has been the subject of a number of contributions. This is a bill which delivers on the Labor government's 2010 election commitment to introduce a new, simple low-cost default superannuation product, called MySuper. It represents yet another important step in improving the efficiency, competition, transparency and governance arrangements for the superannuation industry.

MySuper is one part of the government's comprehensive agenda to make superannuation simpler, fairer and more efficient in order to deliver better retirement incomes. In combination, the 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 60 per cent of working Australians who are currently in the default investment option of a default fund.

There were a number of contributions in this debate which would pertain to the amendments to be moved by the opposition. I will respond to those in the context of the committee debate. I commend the bill to the Senate.

Question agreed to.

Bill read a second time.