After an election in which it had little superannuation policy, the Coalition is set to return to its pre-election policies – including default super, making insurance opt-in for some and a retirement incomes framework.
The Coalition Government is set to return to many of its pre-election superannuation policies in the coming term, after taking little super policy to the election.
Senator Jane Hume, the new Assistant Minster for Superannuation, Financial Services and Financial Technology, used a speech to the Bloomberg Buy-Side Forum to highlight some of the Government’s superannuation policies – including a new way to pick default super funds, making insurance in super opt-in for younger people, and retirement incomes.
“We must never forget the most important foundation – the touchstone – of Australia’s compulsory superannuation system: savings belong to members,” Hume told the forum.
“The purpose of superannuation is to increase savings to provide members’ income in retirement – either in addition to, or instead of, the Age Pension.”
“As a government, our first obligation must be to deliver better member outcomes – more money in retirement. So our focus must be on improving the efficiency of the system, lowering costs and promoting informed member choice and competition.
“It falls to government to steadfastly maintain this focus for the sake of future generations.”
The Coalition took little superannuation policy to the election, with the core promise being no new or higher taxes on super. But it now appears the Coalition intends to return to many of the superannuation policies it had prior to the election. Though much of this agenda has either been stalled in the Senate, or delayed by the Coalition itself.
Hume said that there were “several challenges” to how the super system is operating, which had been “well-documented”, pointing to the reports of the Financial Services Royal Commission and Productivity Commission and arguing they support Coalition policy.
“Both the Royal Commission’s recommendations and the PC’s recommendations lend weight to many reforms that the Government has been pursuing in superannuation.”
The Government has yet to respond to the Productivity Commission report into superannuation. One of its recommendations is for a new way of setting default super funds. The Royal Commission included a recommendation that a person should only have a single default super account. The Government agreed with this recommendation, but has yet to set out a model by which this would be achieved.
Hume said the Government had committed to “taking action” on all the recommendations of the Royal Commission – despite changing its position of agreeing with the recommendation to ban trail commissions for mortgage brokers – and will be consulting with regulators and industry throughout the year on the recommendations.
Despite not fully responding to the Productivity Commission (PC) report, Hume said that several of its recommendations “endorsed existing government policy and recently passed legislation”.
“The Government has prioritised its response by focusing on the PC’s recommendations that overlap with the Financial Services Royal Commission.”
“For example, the Government has accepted the recommendations to realign the roles of the superannuation regulators and to make ASIC the lead conduct regulator in superannuation, and the recommendation that people should only have one default account.”
“We are also considering the PC recommendations for improving outcomes for default members.”
Hume said the Government would provide further information about a potential review of the retirement income system, in response to a recommendation of the Productivity Commission, “in due course”.
The PC report was handed to the Government in December last year.
“Further to that, and consistent with another PC recommendation, the Government remains committed to the changes contained in the Putting Members Interests First Bill.”
“The Bill will require superannuation funds to only offer insurance on an opt-in basis in relation to accounts of new members who are 25 years old, or accounts that have balances below $6,000.”
Retirement incomes may also be a focus for the Government, though proposed reforms of this area have been long-coming. Hume said that work was needed on the retirement phase, as there is “very little guidance on how retirees should draw down their savings when they reach retirement”.
“The Government is addressing this by developing a retirement income framework, which includes a covenant requirement for funds to develop a retirement income strategy. The Government is also exploring ways of expanding the range of retirement income products available.”
The Government’s work on a Retirement Incomes Framework has its roots in the 2014 Financial System Inquiry, which recommended ‘Comprehensive Income Products for Retirement’ (CIPR). There was a discussion paper open for consultation between December 2016 and July 2017, and a Retirement Income Covenant position paper open from May to June 2018. Last year the Government delayed the start date for CIPRs to 2022.
The Coalition also intends to create a superannuation consumer advocate.
“In an industry crowded with opinion makers, industry groups and lobbyists, it is important that consumers themselves have a stronger voice. As such, the government has announced our intention to establish a superannuation consumer advocate and will be consulting on the scope of its activities, funding and governance arrangements,” said Hume.
The 2019 Budget allocated $100,000 towards the advocate, for an “expression of interest process”.