SUPERANNUATION LEGISLATION AMENDMENT (CHOICE OF SUPERANNUATION FUNDS) BILL 2002: Second Reading
Mr CADMAN (Mitchell) (10.01 a.m.) —I rise to speak on the Superannuation Legislation Amendment (Choice of Superannuation Funds) Bill 2002. I have in my hands a report by the Australian Senate Select Committee on Superannuation dated November 2002. It has taken one year for the Labor Party to think about it.
It has taken one year for them to take some positive action by saying that this is a good thing. The fact of the matter is that the Australian Labor Party do not like choice because they think it works against the big funds run by the unions. They are afraid of competition and are seeking to protect their mates in the unions. That is what this is about. The Australian Labor Party will never agree to choice. At the end of the day, I believe that, if they got back into government, there would be no way that they would introduce choice. It is not a factor that is even on their radar, because they do not agree with it. That is the simple truth of the matter. They would rather have the complexity and cost of the current system, which just keeps adding up for people who change jobs and for people in itinerant work. This is a wonderful thing for workers, but the Australian Labor Party keep blocking it.
As I said, there is a Senate report dated November 2002. I stand for the government members of the committee a little because the previous speaker indicated that there was a bipartisan result. It was not a bipartisan result. The government members of the committee clearly stated that the legislation should be passed. The committee as a whole came to a conclusion, and in their comments in the introduction, right at the beginning of their report, they said:
A key issue associated with choice is portability of superannuation benefits. During the inquiry, the Government released a consultation paper on portability. Under the proposed arrangements, portability would relate to the balance of existing funds at 1 July 2004, while choice would relate to contributions made after 1 July 2004.
In the report, as a group the senators said that they broadly agreed with choice, some parties more strongly than others, and they considered the government should get on with the job. One year later, we are still debating this issue, and we still have a whole raft of amendments proposed by the Australian Labor Party—a raft of amendments which only seek to delay the acceptance of superannuation choice for the workers of Australia. That is what all this is about: just seeking to delay, to put off and to never get around to supporting the workers.
The people of Australia should remember that nothing can be blocked in the Senate unless the Labor Party agree. The minority parties and the Independents on their own cannot effectively block any government initiative; it takes the Australian Labor Party to bring it to fruition. I think it is a sad thing that an organisation that claims to support the workers of Australia will not allow this legislation through. If it is so flawed, so terrible, so complex and so difficult, why not let it through and then every day criticise the government for such a poor result? But, no, they are not prepared to give it the test. They are not prepared to let it into practice. They are not prepared to let it become law because they know that it is a good thing for workers. What they are afraid of more than anything else is that large union super funds will not be able to compete. That is the only reason that the Australian Labor Party are opposing this legislation—to look after their union mates, to build up the funds and to continue the complexity that is there now. If there were any rationality, any commonsense or any truth in fact in the statements they are making about the need to change this legislation because it is so terrible for the workers of Australia, if they were thinking smart politically, I am sure they would let it in, let it become law, let it create chaos and then point to the government's incompetence. But that is not their intention. [start page 23927]
I would like to draw the attention of the House to the fact that most workers in Australia have absolutely no say where their superannuation savings are invested. Regardless of the fees they are charged and of the returns they get, they have no opportunity of saying where their funds go. They should be given that say. Every person who has a super fund values that super fund and has probably made that their super fund by choice or they have decided on a fund that best suits their needs on the advice of family or their first employer. Having done that, they ought to be allowed to consolidate the savings generated from their hard work in that fund of their choice. As they go through life prior to marriage—and young people may change jobs on a number of occasions—they should be able to achieve the age of family formation with a certainty of the funds that they have put away and with a capacity to borrow from, or to put up as an asset, their contribution to superannuation. But now that is not possible for many because they have got bits and pieces scattered through a series of funds, much of which is being white-anted away by fees and charges. If it could be consolidated, that process would be much diminished.
In November last year the Financial Planning Association conducted research which showed that 71 per cent of employees believed they should have a right to choose their own super fund. In fact, the FPA chief executive, Ken Breakspear, said he hoped the findings of this inquiry would help encourage the passage of super choice legislation through parliament. That was a year ago, and I am sure there is a continuing requirement by more than 70 per cent of people involved in super to choose where their funds are invested.
The same survey found that almost 50 per cent of those who do not have a say said that they would move to another fund, given the opportunity. So 50 per cent are unhappy with the funds they are in and want to move to another fund. The survey found that only 25 per cent of respondents had been able to choose their super fund. I think that is a terrible thing and this is a good thing the government wants to do. We have been at this now for a year, in the process between the House and the Senate, and for years before that, as we tried to get a breakthrough and a change that would benefit the workers of Australia. The only obstacle in the way is the Australian Labor Party. If the current Leader of the Opposition is true to his word now, he will get in there and make a change, but today we see the Australian Labor Party holding their traditional line of obstruction and non-compliance and seeking to persuade the public of Australia that the government has not done anything.
The fact is that the government has been powerless to do things because of the Senate. The Senate Select Committee on Superannuation stopped short of supporting calls for a cap on fees charged by super funds but said that the government should consider regulating fees to reduce the costs paid by all members. Part of the choice process is to look at the fees that are being charged. Part of the choice of deciding what fund you want is to see which one offers the best opportunity for your stage in life and your prospective employment. The Democrats in the Senate have this weird idea that governments should regulate the fees and charges in superannuation. In many instances I would have to say that I am disappointed by the level of fees and charges that funds put on their members. However it is a factor of choice, and this is not the legislation where we should start fooling around with fees and charges. This legislation is to offer choice; fees and charges can be dealt with in other ways. What the opposition is doing is seizing on fees and charges and rolling them into the choice legislation to try to get other changes that are not part of the choice agenda so that they can use a further excuse, saying, `Well, the government is not really going to consider choice as it should be considered.' [start page 23928]
I think the Australian Labor Party are missing a great chance. If this legislation is so bad, why for political purposes would they not let it through? The fact is they do not think it is bad; they are concerned about the impact on union funds and they want to protect their union friends. I am not including you in that Mr Deputy Speaker, but I know the Australian Labor Party just wants to protect the millions and millions of dollars stored up in union super funds. That is what this is all about—year after year preventing workers from having an opportunity to receive reasonable retirement benefits.
The amendment that is the basis of the Australian Labor Party's objection says that the House declines to give the bill a second reading and regards it as an unsafe choice bill. The reason given is that there is no provision for simple, clear and comparable disclosures so that consumers can understand the total impacts of fees and charges. That has nothing to do with choice. Given the opportunity for choice, the first thing people will ask is, `What are the costs? What are the charges?' So there is absolutely no reason to add this amendment. The excessive entry and exit fees are all to do with the general operation of superannuation. They have nothing to do with the choice factor. The government is seeking to get the factor of choice in as a principle for the workers of Australia. Fees and charges are another issue altogether, and if the Australian Labor Party want to deal with them, they should be dealing with them under general legislation covering super and not under the choice bill.
The fact is that the Australian Labor Party are opposed to choice. They do not want choice. They do not want choice for workers and they are not prepared to back the workers of Australia to give them choice in superannuation in order to get the best results in their retirement to choose a fund that suits them and their families and to provide the most beneficial retirement package. I think the hypocrisy of the Australian Labor Party and the way they claim to represent the workers of Australia is beyond belief. They even want to bring in the compulsory nine per cent superannuation guarantee as part of their amendments to this legislation.
Following the Senate inquiry and the report by the Senate Select Committee on Superannuation, the government said, `Fine, we think choice is important and we will go away and have another look at it and see what other amendments and changes we can make.' On 4 November, the Minister for Revenue and Assistant Treasurer, the Honourable Senator Helen Coonan, stated exactly where the government was prepared to modify things in order to listen to what was said by the community, take note of consultations we have had over a long period and see whether it might be possible to negotiate a reasonable outcome through the Senate.
Regarding the commencement date, employer groups argued they needed at least 12 months to prepare for choice, and the government decided it would not commence this bill until 1 July 2005. That was sensible. Regarding penalty provisions, the current situation is that there is a strict liability offence, with a maximum penalty of $6,600 per breach. There was concern that this would be found to be unconstitutional, so that has been changed, and the penalty will be set at 25 per cent of the value of the contributions paid into an incorrect fund. That provides protection for employees so that an employer cannot claim, `I just happened to write the wrong name on the cheque, and so your money has gone into the wrong account.' The penalty will be capped at $500 per employee. The Commissioner of Taxation will have the discretion to reduce this penalty—including down to nil—if it is an honest mistake, while retaining the option of really applying the force of law if that is needed. [start page 23929]
With regard to default funds, the bill prescribed a three-step procedure that employers must follow when selecting a fund for employees. We felt that this was inappropriate because the default rules imposed an added obligation. This was one of the objections of the Senate committee and one of the reasons that the Australian Labor Party said that there was an impost on small business. The default rules will be changed to reflect the status quo for employers when selecting a fund. If there is no award governing the contributions, the employer will be able to select any complying superannuation fund as a default fund. This is consistent with the current superannuation guarantee legislation. I did not know that the Australian Labor Party objected to that legislation—I think it introduced it, if I remember correctly. So we are following your own pattern; your own template is being followed. The government is following a template laid down by the Australian Labor Party in bringing some consistency to the choice of default funds by employers.
What has the government done and what is it prepared to consider with regard to the choice process itself? The current bill contains two choice processes: either an employee can choose a fund under a formal choice process or an employee can have an individual written agreement. It was said that these two processes were complicating the legislation. So what has the government done about that? The government has proposed amendments to provide for one choice process. An employee will be able to choose a fund at any time provided they have not selected one in the previous 12 months. Employers do not have to accept a fund if the employee does not provide account details or any other prescribed information to prove that the fund will accept the contributions. It is very simple, very easy and very reasonable, and it demonstrates that we have listened to employees, employers, funds and those parties in opposition to this, such as the Australian Labor Party, who do not want and resist and reject—and have continued to obstruct—the introduction of choice in superannuation.
The government has also made amendments in the area of defined benefit funds. The governing rules of some defined benefit schemes require retirement, retrenchment or resignation benefits to be paid to a person, provided they are a member of the fund at the time of these events. That is inappropriate because members of these funds may be able to use the choice of funds process to be paid additional superannuation benefits. The proposed amendments will ensure that an employee cannot choose a fund if they remain a member of a defined benefit fund that fully secures their rights to a benefit. There is no game-playing—it has got to work fairly on both sides, and that is precisely what the government has done. With regard to retirement savings accounts, the Retirement Savings Accounts Act 1997 currently requires an employer to offer an employee a choice of fund before the employer can make a contribution to the RSA. This is an unnecessary choice under the choice of funds process and that provision has been deleted from the RSA Act.
All in all, these are reasonable provisions. This legislation indicates that there is a real prospect for us to be able to make the changes we need. There is a big change through the $1.3 billion package of superannuation co-contribution and reduction of surcharge measures that the government has negotiated through the Senate. The matched-savings measure provides a direct injection into the retirement savings of Australian workers earning up to $40,000, and for battlers there is another benefit of up to $1,000 annually. That is allowing the government to match people who want to put money into funds. The government will stand as their partner and allow them to prepare for retirement. There is a whole range of retirement packages geared for people of lower incomes or those people whose employers may not be supplying an opportunity for them. It will also reduce the pressure on those making very large contributions so that they are encouraged to contribute even more. [start page 23930]
The choice factor is the only block missing from the total package. The choice factor is something that all employees should have access to, and they are being denied that. I repeat: 70 per cent of people want choice, 50 per cent of employees say that they would change their funds given a chance and only 25 per cent of employees are happy with their current fund. It is therefore irrefutable that these changes need to be made. The Senate committee made suggestions and the government has listed a number of amendments and introduced those amendments. The government is concerned that the commencement date, the penalty provisions, the default funds, the choice process itself, the defined benefit funds and the retirement savings accounts should all be modified as the Senate and other groups have suggested.
It is now up to the Australian Labor Party to put their money where their mouth is. They say that they agree with choice: let them give the workers of Australia choice. Let them agree that this legislation should be given a try; let them say, `Let's put this through; we've got objections or worries about certain elements of it and we will be pointing out to you, all through the election campaign, our worries about what you have done.' That would have been a reasonable approach. But at least the workers of Australia who want choice should be given choice. (Time expired)
Debate (on motion by Mr Ripoll) adjourned.
Author: Alan Cadman MP
Source: House Hansard - 4th December 2003
Release Date: 2 Jan 2004