Second Reading Speech
Mr FRYDENBERG (Kooyong - Treasurer)I move:
That this bill be now read a second time.
Australia's superannuation system manages $3 trillion in retirement savings on behalf of 16 million people.
Given the superannuation system's size and compulsory nature, every Australian should demand the highest level of accountability and performance from their superannuation fund.
This is why, on budget night, the government announced the Your Future, Your Super package to ensure that the superannuation system is operating as efficiently as possible, to maximise the retirement savings of all members. The package implements a number of recommendations from the Productivity Commission's 2018 final report Superannuation: assessing efficiency and competitiveness.
Too many Australians are paying too much in superannuation fees. At $30 billion a year, the superannuation fees Australians pay exceed the cost of household gas and electricity bills combined.
The measures I introduce today will lower fees, increase transparency and improve accountability and, in doing so, are estimated to save Australians $17.9 billion over the next decade. This includes tackling the $450 million a year Australians are paying in unnecessary fees as a result of six million multiple accounts.
The bill will reform the operation of our superannuation system in three key ways.
Single default account
The government believes new super accounts should no longer be automatically created every time a worker changes jobs when they do not decide on a superannuation fund. Holding multiple accounts is costly for members. Multiple superannuation accounts held with different funds results in members paying multiple sets of fees and insurance premiums and unnecessarily erodes their retirement savings.
Through schedule 1 to the bill, the government will ensure that a superannuation member's account will be 'stapled' to them as they change jobs from 1 July 2021. At the time of starting a new job, unless a member decides otherwise, their employer will pay superannuation contributions into their existing fund.
Employers will no longer automatically create a new superannuation account in their chosen default fund for new employees when they do not decide on a superannuation fund. Instead, employers will obtain information about the employee's existing superannuation fund from the Australian Taxation Office, if it is not provided by the employee. This reform will ensure that members are no longer accumulating multiple superannuation accounts every time they change jobs.
The introduction of stapled accounts will implement recommendation 3.5 of the financial services royal commission and recommendation 1 of the Productivity Commission superannuation inquiry.
These reforms are estimated to boost balances in super by about $2.8 billion over the decade by avoiding duplicate fees and lost returns.
Underperformance
The Productivity Commission's superannuation inquiry emphasised the need to address underperformance.
Schedule 2 to the bill will require the Australian Prudential Regulation Authority to conduct an annual, objective performance test for MySuper products and other products to be specified in regulations.
All products that fail the test will be required to notify beneficiaries in writing. Where a product has failed the performance test in two consecutive years, the trustee will be prohibited from accepting new beneficiaries into that product. The amendments also provide APRA with a resolution planning prudential standard making power.
The introduction of this new test is expected to deliver $10.7 billion in benefits for members over the decade as members leave underperforming products, some underperforming products improve their performance and others merge with higher-performing funds.
Schedule 2 to the bill will also facilitate the creation of the government's new interactive YourSuper comparison tool. The tool will provide members with simple, clear and trusted information on MySuper products. The tool is expected to boost retirement savings by $3.3 billion over the decade through empowering more members to engage with their superannuation.
Best financial interests duty
Schedule 3 to the bill implements recommendation 22 of the Productivity Commission superannuation inquiry by amending the existing best-interests duty to clarify that this duty requires the trustee to act in the best financial interests of the member.
In addition, enforcement of this obligation is strengthened by:
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- reversing the evidential burden of proof for trustees;
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- creating a regulation-making power to prohibit certain types of payments or investments;
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- creating a regulation-making power to provide for additional obligations on trustees, which will be used to address any avoidance activity; and
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- making breaches of the record-keeping obligations a strict liability offence.
Importantly, there is no 'mental' element required to be established by either a regulator pursuing civil penalties or an individual pursuing recovery of losses or damages against a trustee or individual director for a breach of the best-financial-interests duty.
Schedule 3 to the bill will also remove the exemption that allows trustees not to disclose up to five per cent of holdings as part of their portfolio holdings disclosure, empowering members to make fully informed decisions about their retirement - how their retirement savings are invested.
In conclusion, through the Your Future, Your Super package the Morrison government is taking the next step in modernising and renovating the architecture of the superannuation system to ensure it is working harder for the people of Australia.
Full details of the measures are contained in the explanatory memorandum. I commend the bill to the House.
Debate adjourned.