Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2012
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.