The Government has no timetable for implementing a key superannuation recommendation of the Financial Services Royal Commission, despite agreeing with it and setting out a roadmap for other recommendations.
The Government has released an ‘Implementation Roadmap’ for the recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services directed to the Government. The document lists the recommendations that have already been implemented, along with recommendations for which legislation is expected to be introduced to Parliament by the end of 2019, more by 30 June 2020, and some by the end of 2020.
However a key superannuation recommendation of the Royal Commission doesn’t have a time frame, instead it is listed with “Other Measures”. This recommendation, number 3.5, is that “a person should have only one default account. To that end, machinery should be developed for ‘stapling’ a person to a single default account.”
The Government says this recommendation will be “considered in the context of the findings and recommendations of the Productivity Commission’s report Superannuation: Assessing Efficiency and Competitiveness”. The Productivity Commission recommended new members only be defaulted once.
But the Government already had the Productivity Commission report when it received the final report of the Royal Commission. The Productivity Commission gave its report to the Government in December last year. Unlike the Royal Commission, which the Government responded to over a weekend, the Productivity Commission says: “There has not been a government response to this inquiry yet”.
In February, as part of its response to the Royal Commission, the Government said it “agrees that a person should have only one default account”, without going into further detail.
Superannuation recommendations already completed:
- 3.6 – No treating of employers
- 3.7 – Civil penalties for breach of covenants and like obligations
Superannuation recommendations with legislation to be introduced by 30 June 2020:
- 3.1 – No other role or office for trustees of Registrable Superannuation Entities (RSE)
- 3.2 – No deducting advice fees from MySuper accounts
- 3.3 – Limitations on deducting advice fees from choice superannuation accounts
- 3.4 – No hawking of superannuation products
- 3.8 – Adjustment of APRA’s and ASIC’s roles in superannuation
Superannuation recommendations with legislation to be introduced by the end of 2020
- 3.9 – Extending the Banking Executive Accountability Regime (BEAR) to RSE licensees
Government “taking action” on all recommendations, while Labor accuses of “inaction”
Treasurer Josh Frydenberg says the Government has a “comprehensive response” to the Royal Commission, and is “taking action” on all the recommendations. But this does not mean fully implementing all the recommendations, as for one thing the Government reversed its own position on a recommendation in regards to mortgage brokers.
“For measures contained in legislation introduced into the Parliament before 1 July next year, the Government expects the majority to commence by 1 July 2020 or Royal Assent,” said Frydenberg.
“Given its scale and complexity, this represents an unprecedented response. It demonstrates the Government’s commitment to strengthening consumer protection laws and empowering Australia’s financial regulators to enforce the law.”
The Treasurer compared work to implement the Royal Commission recommendations favourably with the Future of Financial Advice (FOFA) reforms under Labor, saying it took almost 23 months from when the committee report was tabled to when legislation was first introduced.
Labor has criticised the Government for its “inaction” in response to the Royal Commission, with Shadow Treasurer Jim Chalmers saying the “Morrison Government now wants to be congratulated for releasing an overdue implementation timetable”.
“After so much delay already, today’s announcement that the recommendations won’t be implemented for another 15 months will be deeply disappointing for the victims of banking misconduct.”
“It has now taken six months for Scott Morrison to release an implementation timetable, only to reveal that this ‘fast-track’ extends to the end of 2020 – almost two years after the final report”.
Government response to Royal Commission “tepid at best”
The Australian Institute of Superannuation Trustees (AIST) says the Government’s roadmap to implement the recommendations of the Royal Commission is “welcome but overdue”.
AIST CEO Eva Scheerlinck said that, as the recommendations were handed down more than six months ago, the Government’s response has been “far too slow”.
“The Government’s response so far has been tepid at best. It is crucial for restoring consumer trust in Australia’s financial system that key recommendations to address harmful conflicts of interest in the financial services sector are prioritised and implemented in a way that will improve outcomes for all Australians.”
AIST is calling on the Government to prioritise recommendations aimed at stopping the “worst practices among banks and other for-profit entities” – including a ban on the hawking of super products.
Financial Services Council CEO Sally Loane pointed out that a framework for ‘default once’ super fund accounts was not dealt with as part of the implementation roadmap.
“We look forward to the Government providing a response to the issue and timing for the reform as part of its response to the Productivity Commission’s report into the efficiency of the super system,” said Loane.
Industry Super Australia (ISA) says it welcomes the commitment by the Government to implementing the recommendations of the Royal Commission, while warning not to loose sight of the interest of super fund members.
A statement by ISA said that “whilst quick implementation is to be commended, it should not compromise the interests of members”.
“While the recommendation relating to stapling will be dealt with as part of the Government’s response to the Productivity Commission, ISA will continue to work with Government as they determine their response to this important recommendation.”
Industry Super Australia has criticised some of the recommendations of the Productivity Commission, instead preferring that super fund members be automatically rolled over into new default funds when they change jobs instead of carrying the same fund to the new employer.
ISA Chief Executive Bernie Dean said the Government’s roadmap included an “ambitious legislative timetable”.
“The Royal Commission did a very good job of identifying where the problems and misconduct were – now the Government must get on and fix them.”
“We welcome the Government’s commitment and the ambitious reform program they have set out and we stand ready to work with them as they implement these important protections for consumers.”
“While this important work is underway, we urge the Government not to lose sight of the other challenges such as chronic underperformance and the fact that one in three workers are not even getting paid super.”
More to come.