Most of the so-called “landmark reforms” (in the words of Treasurer Josh Frydenberg) in the original Your Future, Your Super Bill were nothing more than a concerted attack on our world-class superannuation system by the Federal Government.
Fortunately, several important elements of the legislation were amended or rejected after negotiations with independent MPs in the Senate.
Significantly, the proposal to allow the Treasurer to override any investment decisions made by fund trustees was removed.
This keystone measure was considered to be ‘government overreach’ designed to attack industry funds and their investments at the behest of the Treasurer.
Businesses such as The New Daily, which is owned by a number of industry funds, have been hotly criticised by the hounds on the government backbench seeking to make a name for themselves.
Could it be because the content of The New Daily may be critical of federal politicians or short-sighted government policies? Imagine Josh Frydenberg having the final word on how your retirement savings are invested?
And in an ironic twist, some National MPs argued that this provision would enable a future treasurer (says Labor) to block investments in the coal or gas industry.
In the House Anthony Albanese pointed out the government’s ideological opposition to compulsory superannuation and their view that it is “time to kill superannuation stone dead . . . and that is the view of the Liberal and National parties when it comes to workers having decent retirements and having dignity in their later years”.
An important provision of the bill which did get through was the idea of ‘stapling’ a super fund to a person throughout their working life. The clear intent of this measure is to reduce the number of extra super accounts to save money in fees.
In practice it means that if a worker changes jobs, he/she is ‘stapled’ to their previous fund. This is all well and good if the fund they are stapled to is not a dud fund in which case they will lose a substantial part of their retirement savings. It will place extra pressure on APRA to ensure members are not stapled to an underperforming fund.
An immediate problem with the stapling initiative has to do with workers moving into hazardous jobs who rely on insurance policies specific to their occupation such as in the building and construction industries. Stapled members may not be covered for their new occupation as many group insurance policies contain exclusions for occupations such as labourers, bricklayers and scaffolders.
Industry funds welcome the introduction of the performance test which constitutes a section of the new Act aimed at holding underperforming funds to account.
However, one would assume that all funds providing superannuation services would be subject to the same review, but this is not the case. It will not apply to non-default retail funds. AIST CEO, Eva Scheerlinck, said, “The changes, while removing an element of serious overreach, have done nothing to address that more than one third of their super savings will not be subject to scrutiny and disclosure and does not prevent members from being stapled to funds that have not been tested or have failed the test”.
An annual objective performance test will be applied to default MySuper products and funds that fail will be required to inform members and chronic underperformance will result in the funds not being able to take on new members.
The members’ best interest test has also been changed to a best financial interest test and the obligation to provide better information regarding how their retirement savings are invested is further imposed on trustees. This ‘reform’ has been passed in spite of the fact that trustees already have direct responsibilities under trust law, the Superannuation Industry Supervision(SIS) Act 1993 and corporations law. And the normal onus of proof has been reversed to require a trustee to prove why any decision taken – without materiality threshold – was in the best financial interest of members.
It will be interesting to see how these changes play out and nice to see that the government’s attempt to take over trustees’ investment decisions was thwarted.
And, hey, it’s 10 percent super from 1 July 2021! First increase since 2014!