Explanatory Memorandum
(Circulated by authority of the Minister for Revenue and Financial Services, Minister for Women and Minister Assisting the Prime Minister for the Public Service, the Hon Kelly O'Dwyer MP)Chapter 6 Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018
6.1 This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
6.2 This Bill contains amendments to the SIS Act, SUMLM Act, ITAA 1997 and TAA 1953 to protect individuals' retirement savings from erosion, ultimately increasing Australians' superannuation balances.
6.3 Superannuation is a major part of Australia's retirement income system. Together with the Age Pension and savings outside superannuation, it supports Australians in their retirement years.
6.4 Superannuation is now the second-largest savings vehicle for Australian households (accounting for 17 per cent of household assets). Its importance is projected to grow rapidly in the coming decades.
6.5 Given the importance of superannuation to Australians, the Government is seeking to ensure that people's hard-earned savings are not unnecessarily eroded by fees or inappropriate insurance arrangements.
6.1 The Bill will protect members' superannuation savings from erosion by:
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- limiting fees so that low balance savings can grow and are protected from disproportionately high fees;
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- banning exit fees to remove a barrier to account consolidation;
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- ensuring that arrangements for insurance in superannuation are appropriate so that members are not paying for insurance coverage that they do not know about or premiums that inappropriately erode their retirement savings; and
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- strengthening the ATO's role in reuniting small, inactive balances to reduce the costs to members and consolidate the accounts of members that have accrued multiple superannuation accounts.
Fees charged to superannuation members
6.1 Schedule 1 to this Bill prevents trustees of superannuation funds from charging certain fees and costs exceeding 3 per cent of the balance of a MySuper or choice product annually where the balance of the product is below $6,000.
6.2 The fees that are capped are administration and investment fees. The costs that are capped are amounts prescribed in regulations incurred by the trustee for administration of the fund and investment of the fund's assets and not otherwise charged as a fee.
6.3 The Schedule also prevents trustees from charging exit fees on all superannuation products, regardless of a member's account balance.
6.4 This will prevent inappropriate erosion of low balances by high passively-incurred fees, and will remove a disincentive to account consolidation or rollovers by members.
Insurance for superannuation members
6.5 Schedule 2 to this Bill prevents trustees from providing opt out insurance to new members aged under 25 years, members with balances below $6,000 and members with inactive MySuper or choice products, unless a member has directed otherwise.
6.6 This will better target default insurance cover and prevent inappropriate erosion of retirement savings caused by insurance premiums.
6.7 Members will still be able to obtain insurance cover within their superannuation if they choose to do so.
Inactive low-balance accounts and consolidation into active accounts
6.8 Schedule 3 to this Bill requires the transfer of all superannuation savings with balances below $6,000 to the Commissioner if an account, related to a MySuper or choice product has been inactive for a continuous period of 13 months.
6.9 The MySuper or choice product will not be transferred if the member has chosen to maintain insurance or if the existing insurance cover has not ceased.
Human rights implications
6.10 This Bill does not engage any of the applicable rights or freedoms.
Conclusion
6.11 This Bill is compatible with human rights as it does not raise any human rights issues.