Not-for-profit super funds have accused the federal government of caving into banks saying new draft legislation put commercial gains ahead of what was right for the sector and its members.
“The ‘for-profit’ bank-owned funds, with their chronic underperformance, have lobbied the government to design a disclosure regime that places their commercial interests ahead of the public interest,” Industry Super Australia chief executive, David Whiteley, said.
“After a fortnight of scandals involving banks, it is astonishing the government would introduce a bill that again suits the banks and their super funds. Their spurious claims about compliance costs have yet again prevailed over sensible policy settings.”
Assistant Treasurer Kelly O’Dwyer introduced two bills to Parliament, saying up to 800,000 employees who currently do not have choice of fund under enterprise agreements and workplace determinations would benefit if the choice legislation was passed.
Separately, she said the Transparency Measures Bill fulfilled the government’s election commitment to enhance the quality of information available to fund members and employers so they could make informed decisions when comparing the performance of funds.
But ISA immediately slammed both pieces of proposed legislation, saying the government’s decision to exempt banks from disclosing their charges and returns on some super products meant consumers would not be able to make informed choices.
Mr Whiteley said there would be next to no benefit for consumers in the new ‘transparency’ measures, adding: “Instead, banks and their ‘for-profit’ super funds will continue to bury facts about fees and investment returns for too many of their investment options.”
Moves to broaden super choice
In introducing the legislation, Ms O’Dwyer said currently around two million employees did not have the opportunity to choose the fund into which their compulsory employer contributions were paid.
“A common way this can occur is through enterprise bargaining agreements and workplace determinations, which may mandate a given super fund,” she said.
“The Turnbull government recognises it doesn’t make sense to force employees to save money in superannuation but then leave key decisions about how it is managed outside their control.
“The Choice of Fund Bill is designed to let people take control of their superannuation to improve retirement outcomes.”
She said the change also meant people with multiple jobs who may currently be forced to maintain more than one super account would be able to consolidate their retirement savings to ensure their savings were not eroded by multiple sets of fees and insurance premiums.
Transparency measures not so clear
Meanwhile, Ms O’Dwyer said the transparency bill changes would result in super funds being required to develop choice product dashboards for their top 10 largest choice investment options, by value.
Super funds would be made to disclose investments made directly and through associated entities, but not through non-associated entities.
But Mr Whiteley said new laws only requiring funds to produce a public dashboard for their top 10 products denied consumers simple, accessible information on thousands of investment options.
“Incongruously, the government is also seeking to remove Howard-era choice of fund exemptions, while not requiring super funds to provide consumers with the information they need to make an informed decision,” he said.
The legislation will not pass the Senate before the May budget.