The Government has finally delivered the details of its Stronger Super package but, as Mike Taylor writes, those hoping for certainty may be waiting a very long time.
While much attention was directed towards the final release of the Government’s Stronger Super package last week, a single message from the superannuation specialist at the Institute of Chartered Accountants in Australia, Liz Westover, appeared to resonate most clearly with the broader financial services industry.
The message was that having delivered on its Stronger Super changes, the Government should simply “stop tinkering” with the superannuation rules and allow Australians some certainty about what for many of them will be their largest single investment after the purchase of a family home.
Of course, the likelihood that the Government will heed Westover’s plea is remote. In each of the four budgets delivered by Treasurer Wayne Swan, under both the Rudd and Gillard Labor administrations the Government has seen fit to tweak the super system – sometimes dramatically, such as reducing concessional contribution caps.
And as the Opposition spokesman on Financial Services, Senator Mathias Cormann, last week made clear, the Stronger Super package was significant as much for what it excluded as what it ultimately contained.
The elephant in the room according to Cormann is the treatment of default funds under modern awards and the manner in which this delivers a monopoly to industry superannuation funds.
Cormann is also concerned that the Government appeared to astutely side-step some key Cooper Review recommendations on imposing better corporate governance by requiring independent directors on superannuation boards, and closer APRA oversight with respect to those holding directorships of multiple boards.
Anyone who has been closely watching the superannuation industry knows that Cormann is making a none-too-oblique reference to a number of well-known personalities who, at the same time as holding multiple directorships on the boards of industry superannuation funds, also wield considerable power within the broader Labor movement.
Nor was it lost on many of those reading Cormann’s comments on the need for improved corporate governance that they were being made in the wake of the controversy which swirled around MTAA Super and at the same time as media attention was being directed at the leadership of the Health Services Union.
While it may not have been deliberate, the release of the Stronger Super package last week served to indicate to many of the Government’s critics that it was not as much a captive of the industry superannuation funds as many might have claimed.
The fact that the package imposed a $1,000 figure with respect to auto-consolidation at the same time as allowing some flexibility around fees for funds servicing larger employers clearly ran counter to some of the arguments which had been pursued by the industry superannuation funds.
This probably explained the relatively positive welcome delivered by the Financial Services Council (FSC) and some of the larger institutions who had clearly been working hard behind the scenes.
In his response to the release of the package, FSC chief executive John Brogden suggested the Government had “landed on a balanced and measured package”, and then cited the improvements to MySuper as:
- Allowing super funds variable pricing (variable investment fees and variable administration fees);
- Tailored investment strategies for workplaces of more than 500 employees to reflect workplace profiles and demographics;
- Allowing limited flexibility for workplaces of less than 500 employees through flexible administration pricing;
- Allowing flexibility and workplace tailoring for insurance;
- Stripping out the red tape and cost by not requiring a separate licence or fund for MySuper;
- Tick-a-box account consolidation for superannuation balances greater than $1000;
- Appropriate risk-based capital requirements for super funds.
It was perhaps a measure of the degree to which the FSC and others had been successful that the industry fund’s political lobbying arm, the Industry Super Network (ISN) indicated it would continue its lobbying of the Government to extract the sort of framework it wanted.
“ISN will be encouraging government and regulators to remove the proposed $10,000 threshold for the consolidation of account balances when it is due to increase in 2014,” the ISN release said.
“The Government needs to determine the final policy parameters for the multi-pricing arrangements and address employees’ super savings being flipped into more expensive products. This is why the 2014 account consolidation process is central to the integrity of the reforms,” it said.
“Further, super funds should need to demonstrate to APRA that any discounts to employers are the result of genuine scale advantages, as argued by retail super funds, and not cross subsidized by other fund members.”
So the message for superannuation fund members is that while the Government has delivered on its Stronger Super package it has not delivered on the certainty being craved by the ICAA.
The timetable for the delivery of the Stronger Super changes combined with the continued lobbying by groups such as the ISN and the reference of the default funds under modern awards issue to the Productivity Commission means that much will remain up in the air for at least the next 18 months.
Then too, there is the reality that within the same timeframe Australians will be asked to go to another Federal Election. The only certainty with respect to superannuation appears to be continued uncertainty.
