What a difference a week makes when you consider the pace of debate in this place compared to last week. I suppose the current subject matter might mean a slightly lower degree of interest. That is not to say superannuation isn’t important, but, for those in the gallery, it’s probably a slightly dryer debate than the one you missed out on last week. Anyway, thank you for being with us.
It is a pleasure to join my colleagues to contribute to the debate on the two bills we’re debating at the moment: the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 and the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017. As many of those who’ve spoken before me in this debate have said, the focus of the legislation we’re debating at the moment is on putting consumers at the heart of it and making sure that the superannuation sector is governed and regulated properly. It is on making sure that the members—who often have very little say and very little power—have a greater degree of oversight and a degree of control over the choices made around their future savings—savings for their retirement, which are exceptionally important.
It is a pleasure, as I have said, to contribute to this debate. Turning briefly to the elements of both pieces of legislation, as Senator Ruston, the previous speaker in this debate, and also Senator Fierravanti-Wells have said, one does have to wonder why there is a degree of opposition to some of the measures we’re talking about here. They are very straightforward and they are improvements. They are enhancements to existing regulation. They are a better safety mechanism and a better regime that ensures members’ interests are looked after.
I will look at Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 first. As Senator Ruston mentioned, there are three broad areas. I will go into a little more detail and then consider them as a whole. The superannuation industry requires trustees to assess on an annual basis whether the outcomes that have been delivered by MySuper products are promoting the financial interests of MySuper members. That is a key element of this legislation, so it’s incredibly important.
What is superannuation there for? It is there for those who contribute to it for their future, for their savings and for their retirement. Superannuation helps people to stand on their own two feet when they are no longer receiving an income from employment. If they weren’t born wealthy, this is their way of making sure that their retirement is comfortable and that they are going to be well looked after, so superannuation is about the members. They’re the people putting the funds in; they’re the ones who, ultimately, are going to be taking the funds out; and we need to make sure that their interests are protected and guarded at all costs.
As stated previously, the legislation allows Australian Prudential Regulation Authority, APRA, to refuse or cancel an authority to offer a MySuper product if it has reason to believe the registrable superannuation entity or licensee may fail to comply with its obligations. I think that degree of control on the part of the regulator is important. We need a safety mechanism or a safety switch to ensure that those entities who are in the market purporting to offer a particular form of service actually do that and that they’re held to account, and to ensure that their members can rest assured that they will actually have what they are told they will have.
The legislation also enables the imposition of civil and criminal penalties on the directors of those registrable superannuation entities or licensees who fail to execute their responsibilities to act in the best interests of members or who use their position to further their own interests to the detriment of members. I think that’s a pretty straightforward element of this legislation. We wouldn’t tolerate it in the private sector when it comes to the directorship of private entities here in Australia and we certainly wouldn’t tolerate it when it comes to senior office holders in government—be they elected officials or appointed officials—so why would it be any different here? We need to make sure there is consistency, and I have heard ‘consistency’ uttered in this debate previously. This legislation does bring consistency about, but, on such an important issue, by making sure there is no ability for people to use their position to further their own interests to the detriment of members.
The legislation allows APRA to refuse authority for a change of ownership or control, where it has concerns about the person seeking ownership or control, and to give a direction to a person to relinquish control of an RSE licensee and remove or suspend an RSE licensee where it is subject to the control of its owner. It also aligns APRA’s directions powers in relation to the superannuation industry with its broader directions powers in the banking and insurance industry, again, to bring about consistency and to ensure that APRA, in discharging its duties, is doing so in a consistent fashion. This, again, blows out of the water the argument that somehow it is a targeted attack on certain sectors and certain entities. This proves that this is about consistency and making sure a level playing field, if you will, is applied to this. It also requires RSE licensees to hold annual members meetings, which provides, as Senator Ruston said earlier on, a greater degree of direct accountability between members and their funds to understand—in the same way a shareholder can with a private entity in which they may hold shares—why decisions are made and to seek explanations for decisions which do not deliver the best outcomes. Often there are good explanations for these sorts of things happening, but this legislation will ensure that members do have the capacity at least to ask those questions.
The legislation will also require superannuation funds to disclose on a semi-annual basis investments they hold directly or through associated entities and initial investments into non-associated entities. The ‘T’ word, transparency—something which we are big on and which I will come to more broadly later on—is a critical part of this legislation. If there’s nothing to hide, then there’s nothing to worry about and then there’s nothing to oppose in this legislation. There’s no need to be concerned about things like transparency. We here in politics are subject to extreme levels of transparency—people know what time we fly; what airline we are on and how much it costs; how many reams of paper are used in our electorate offices; how often we fill up our cars with petrol or diesel. Transparency is a good thing. We in this place spend taxpayers’ money and we are accountable to the taxpayers of Australia, and so should the directors and managements of superannuation funds be accountable to their members. So those are some of the areas in the first bill I mentioned, the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017.
Of course the other piece of legislation we are talking about today is the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017, which is the one that I think has garnered the highest degree of interest, certainly in terms of the limited media interest there has been in this legislation. It requires registrable superannuation entity licensees to have at least one-third independent directors and it requires the chair of the board of directors to be one of those independent directors.
I’m going to go over some of the ground that has already been gone over in this debate. Having that independence in what is a significant and important entity, and one that holds in its hands the future of many Australians, ensuring that decisions are made are in accordance with members’ wishes, is a good thing. It’s something that many have talked about with great positivity. I will come to some of the comments made by observers and stakeholders alike with regard to the three broad areas of the legislation. In summary, they are: governance arrangements relating to trustees—who they are and how they are appointed—which I have just gone over; the members’ outcomes—ensuring that members have a capacity to have some oversight over their superannuation funds and decisions that are made, and that the best decisions are being made in their interests—and, of course, delivering on member choice as well.
Noting that, as I understand it, 20 per cent of all members of superannuation funds in this country can’t choose where they’ll be making their compulsory superannuation contributions, it is important that in that situation there is a degree of accountability for people who manage those funds. Also, when you can’t make a choice about where your superannuation contributions are going to be made, you will see people with multiple accounts. This results in higher fees, so that, at the end of the day, there is less for them to draw on in their retirement. This bill is doing away with this duplication and the rigid approach that has been taken by some entities to not allow individuals to choose the fund they contribute to.
I think that choice is a good thing in this country. It helps people to be more self-sustaining in their retirement. That’s why I think all the elements of this bill are critically important and are great initiatives, and that’s why I think they have been so broadly welcomed. I will outline some of those endorsements a little later on, but the key points are: it is about improving standards of accountability, transparency and the like, and it is also about making sure consumers are at the heart of the decision-making process.
I note the significance of superannuation in the quarter of a century—the 25-odd years—that compulsory superannuation contributions have been a part of the way of life in Australian society. They have grown from around $136 billion in 1992, when I was about nine years of age, to nearly $2.5 trillion. That’s a significant amount of money in anyone’s terms. The important thing to remember in all of this is that those funds are the Australian people’s funds. They are the funds that people will be drawing on and relying upon in their retirement, so that they don’t have to rely on the taxpayer. I think we would all agree that, if we can, it’s best to ensure that people have the capacity to rely on their own savings rather than on the pension. I accept and understand that there are, unfortunately, some people who will not have that opportunity and who are unable to put away superannuation contributions to a level that would mean they would be completely self-sustainable financially in retirement. But this is something we should foster, and this legislation will enhance our ability as a country to ensure that that does happen here.
The word ‘expectation’ has been used a lot in the debate. In this day and age, I think expectations are critical. For those consumers who can choose which super fund they contribute to, they will vote with their feet. So, enhancing the ability for people to have a choice over which super fund they use is, I think, an exceptionally good thing, and it is consistent with what we’re doing in other parts of the economy and other parts of the business world. If you look at banking, the shift in the way banks have been interacting with their consumers, the abolition of ATM withdrawal fees, and the different ways that banks try and attract business has been possible because there is that flexibility and choice on the part of members. Enhancing that flexibility and ability for consumers to choose meets their expectations. It’s 2017 and people want to make sure they have the best product for them.
It’s also about how members’ money is going to be used. They want to know that the directors and the people who are making the decisions around how the money—that people have put away every fortnight or every month—which is stored away in large funds, is being used to enhance the outcomes for them at the end of their careers, when they have finished working. They want to make sure that they have more money there than they put in, and the biggest amount possible. I think that’s what we all want. For the sake of clarity, I should put on the record—and it’s an important point to make—that there is a misnomer out there that politicians are on a massive defined pensions scheme. I can assure you that that is not the case. It’s a normal pension scheme, like that of any other public servant or any private sector employee. So we too want to make sure that our contributions to our superannuation schemes are performing in the best way possible. The independence and transparency that these bills will bring about will help in making sure that superannuation funds perform to the best level possible. We live in an age of scrutiny: there is greater scrutiny of government, as I said before, and of individual members of parliament, corporate entities, banks and, of course, superannuation funds. It is to be expected.
People are more engaged with how their funds are to be used. In Tasmania, one business I’ve seen, Tas Ethical, assists Tasmanians in making decisions around how their money is invested. That is a sign that the community are more interested in making sure that their money is used in accordance with things that they think are right, and the proper use of their funds, as opposed to just investing and not having any oversight or understanding of how the money will be used. Having said that, though, for a great number of younger Australians—and I think I can still cling on to that moniker of ‘younger Australian’ for myself—there is not a great deal of interest in how superannuation funding is used, managed and allocated. Particularly in this day and age where young people will transition from one line of work to another, they will probably have multiple funds and not a great degree of interest, at a younger age, in how their superannuation is being managed. That is something that I think is probably on a downward trend.
We all need to think about our retirement. We have an ageing population and, as Senator Ruston said, the cost to the taxpayer of supporting the ageing population through pension and other health-related costs is going up, and it is something that we need to manage. I think there is a realisation on the part of some young Australians that we need to make sure that our superannuation is working for us, because one day we will be relying on it. The capacity to rely on pensions for years and years to come will, I think, be diminished, given the amount that it will cost the taxpayer with our ageing population. So I think it is sensible in that respect. As I say, it is about—consistent with the trend in Australia for people to have greater levels of knowledge—being informed about how their funds are being spent, and knowing whether that is supportive of a cause that they would identify with. For some people it may be the environment and for others it may be related to animal welfare or the like. People are seeking to have the capacity to make a choice, and these bills are providing that.
I will go to some of the endorsements that have been pronounced in relation to this legislation, starting with the governance and management arrangements around superannuation funds and the chair of the 2010 super system review. Many of these are contributions that were made to the Senate Economics Legislation Committee, which inquired into this legislation, chaired by the hardworking Senator Jane Hume from Victoria. Jeremy Cooper, who was appointed by the former Labor government to conduct the super system review, said:
… providing for independent directors shouldn’t diminish the representation of members but actually enhance it. So, rather than the model being broken, I think this is the 21st-century answer to our highly successful superannuation system—how we can govern it better and, most particularly, how we can make people who are forced to save into it feel confident that the standards of governance is at or near world’s best practice.
David Murray, who was appointed by this government to the 2014 financial system inquiry, made a contribution to the same Senate committee I mentioned earlier. He said:
When a governing body sits to serve the interests of the people it’s meant to serve, it shouldn’t be constrained by peripheral interests. That’s why, in my view, independence is very important—independence from the executive and independence from peripheral interests.
I think that’s absolutely right. People make claims about interference with decision-making processes and undue influence being exercised. Well, here we are talking about some independence being injected into the directorships of these entities so that we make sure there is true independence in the interests of members.
Louise Petschler, General Manager Advocacy at the Australian Institute of Company Directors, said:
The AICD considers that introducing a requirement for at least one-third of the board to be comprised of independent directors will strengthen governance within the superannuation sector.
That is comprehensive. There’s no two ways to read that. It is a fairly clear indication that they accept and believe in these amendments.
The final one I’ll refer to is Bill Kelty, the former union leader. In an article published in The Australian sometime back, he said:
This is compulsory legislation, therefore the level of trust and accountability must not be less than what … corporations in Australia apply, it should be greater.
Those sorts of endorsements and key points are critical to ensure that we have the best system possible, that it is world’s best practice. It is for those reasons that I’m supporting this legislation; I think young Australians will benefit.