The Government has reintroduced legislation to Parliament to expand super choice to more employees, allowing them to choose which super fund receives their employer contributions.
The Government has introduced the Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019 to the House of Representatives. The Bill would, if passed, let employers covered by a new workplace determination or enterprise agreement choose which super fund receives their compulsory employer super contributions.
Currently, many employees have super choice. But employer contributions made in accordance with an enterprise agreement or workplace agreement – which may set out a single fund, or a number of funds – are deemed to satisfy the choice of fund rules.
This year, the Fair Work Commission found that a Kmart enterprise agreement which required super contributions to go to the REST super fund may have left employees worse off than they would be under the award.
“Lack of choice of fund for all workers disadvantages some Australians and contributes to employees having multiple superannuation accounts and paying multiple sets of fees and insurance premiums, which can reduce their retirement income. It also leads to member disengagement with their superannuation,” says the Explanatory Memorandum to the Bill.
The EM goes on to say that the Productivity Commission “found that legislative change to remove the current choice of fund restrictions was needed”. Though the Productivity Commission report – to which the Government has yet to fully respond – goes further, recommending that “terms in enterprise and workplace agreements that restrict member choice should be invalidated”.
This is the second time the Government has put such legislation before the Parliament. The Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017 was introduced in September 2017, but languished in the Senate until lapsing with the election.
This policy was announced in response to the Financial System Inquiry, in October 2015.
Should the Bill pass, the change will apply to enterprise agreements and workplace determinations made from 1 July 2020.
This Bill is before the House of Representatives. Only five Parliamentary sitting days remain in 2019.
Update: The Bill has been referred to a Senate Committee for an inquiry, with a reporting date of 21 February 2020.
“Vital step” to modernise default super system: FSC
The Financial Services Council (FSC) – which, in part, represents retail superannuation funds – welcomed the Bill, saying it was a “vital step” to modernise the default super system.
Retail super funds have long been campaigning for increased access to the default super system.
FSC CEO Sally Loane said: “It’s unacceptable that even today, when there is so much pressure on super funds to modernise and be more efficient, a worker can arrive at a new job only to find they must open a new superannuation account with a fund specified in an enterprise agreement – whether they want to or not.”
“Safeguarding the right of workers to choose their own superannuation fund is fundamental, but there is also more to be done to ensure that our default superannuation system serves all Australians, whether or not they are engaged with their superannuation.”
“We continue to urge the Government to enact the recommendations of the Productivity Commission and Royal Commission and implement a default once system for superannuation so that all Australians can take their super fund with them from job to job, just as they do with bank accounts and tax file numbers.”
This article has been updated since publication with the comments by the FSC.
Status of current major superannuation Bills
- Treasury Laws Amendment (Reuniting More Superannuation) Bill 2020
- Assent 22 March 2021
- Transfer superannuation held by Eligible Rollover Funds (ERFs) to the ATO, and close ERFs by 30 June 2021.
- Treasury Laws Amendment (Your Future, Your Super) Bill 2021
- Before the House of Representatives | Second reading moved 17/02/2021
- Various changes, including ‘stapling’ new employees to super funds, annual performance tests of MySuper products and other super products by APRA, and create best financial interests duty test.
- Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020
- Before the Senate | Second reading moved 02/09/2020 (introduced to Senate first)
- Increase maximum number of SMSF members from 4 to 6
- Treasury Laws Amendment (More Flexible Superannuation) Bill 2020
- Before the Senate | Second reading moved 31/08/2020
- Allow people aged 65 or 66 to use the three-year non-concessional contributions bring-forward rule
Last updated: 11/04/2021