Labor may be more open to expanding super choice rules than unions and industry super funds.
There is currently a Bill before Parliament – the Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019 – which would expand the number of employees who can choose which super fund receives their employer super contributions. A Senate inquiry into the Bill is ongoing.
This is second time the Coalition Government has tried to get such a Bill through the Parliament. Though Labor may support the Bill, potentially with some amendments.
Labor Shadow Assistant Treasurer Stephen Jones, said Labor would take a position on the Bill when the inquiry finished, but said it was clear that people want to choose their super and that the “law should support that”, according to a report in the Australian Financial Review.
The Government had previously tried to pass this change, but the Bill – the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017 – stalled in the Senate. At that time Labor Senators weren’t necessarily opposed to changes to super choice, but wanted amendments to ensure there were “no impediments to collective bargaining that would lift superannuation arrangements beyond the community standard” and to “ensure that sufficient safeguards exist when workers exercise choice of fund”.
However unions and industry super funds are strongly opposed to the current Bill. The ACTU said the proposed law is “contrary to workers’ interests” and gives “for-profit superannuation funds exactly what they want. More opportunity to covertly cross-promote”.
“Workers’ best interest could be sold to the highest bidder under this arrangement.”
The ACTU argues, in its submission to the Senate inquiry, that super funds are better able to work with workplaces that only have a single super fund to “ ensure they are complying with their obligations and develop strong relationships with both the employers and the workers”.
Pointing to statistics that almost $6 billion in superannuation is underpaid each year, the ACTU says “superannuation funds are a key ally for workers seeking to ensure their superannuation is paid and paid on time. Workers bargain for a single fund, often as a measure to improve super fund compliance. This is most common in industries with highly vulnerable workers, like cleaning, security and construction”.
Several individual unions and industry super funds, along with the progressive think-tank the Mckell Institute, made submission opposing the Bill or raising concerns.
Industry Super Australia (ISA), in its submission, said that while the “overwhelming majority” of Australians had super choice most do not exercise this choice, instead relying on the default super system.
ISA argues that the default super system should be strengthened, as “underperforming super funds are the single most costly drain on members’ retirement savings”.
“Funds wanting the privilege of managing default contributions whether by being named in a modern award or an enterprise agreement should meet a high standard. This privilege should be the preserve of only those funds that can deliver member value through net returns above a transparent performance benchmark.”
“A strengthened default system is critical to achieving this reality. The government should take the necessary steps to appoint members to the FWC [Fair Work Commission] Expert Panel to enable the expert panel to convene and begin the process of ensuring that only high-quality funds are named as default funds in modern awards.”
One of the groups making a submission in support of the Bill was the Financial Services Council (FSC) – which represents retail super funds, amongst others. The FSC wants the Bill to go further and apply to existing agreements at some point in the future – the changes as set out in the Bill only apply to future agreements.
The FSC pointed to the recent case of a Kmart agreement that came before the Fair Work Commission. The Commission found that removing choice of super funds in the agreement as not offset by wage rises that were as low as one cent an hour. The agreement set Rest as the super fund, and was negotiated with the Shop, Distributive and Allied Employees Association – which nominates directors to the board of Rest.
Super Consumers Australia also made a submission in support of the Bill, but wants more consumer protections introduced.
The submission says that giving more choice “will not drive competition in the superannuation market”. “This needs to be coupled with pro-consumer measures which break down information asymmetry and help people end up in better performing funds. To get the most out of extending choice there is an urgent need to address the lack of competition in the default system and introduce consumer protections which will improve people’s decision making.”
Among the recommendations of Super Consumers Australia is urgent legislation of a ‘right to remain’ test, which requires MySuper or Choice products to not underperform a benchmark by more than 0.5% over a rolling eight year period. Another recommendation is for funds to be required to publish “simple, single page” product dashboard for all investment options by June 2020. ASIC has been pushing back the introduction of product dashboards because the Government hasn’t made the necessary regulations.
The Senate inquiry into the Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019 is set to give its report by 21 February 2020.
A public hearing on the Bill was scheduled for 29 January 2020, but this did not proceed.