Government Senators' dissenting comments

1.1The third interim report of this retirement systems inquiry is yet another rushed, unserious and reheated wish-list of reforms from the chair, Senator Andrew Bragg.

1.2Neither the Coalition-majority interim report, or earlier interim reports, offer Australian one dollar more for their retirement savings and income.

1.3The Senate approved this inquiry in good faith to inquire into innovations to Australia’s retirement system. It has failed to do so.

1.4Instead, the wide terms of reference have been ignored, for the third time, and the inquiry has prioritised partisan policy proposals.

1.5Further, the Senate Inquiry has been utilised to merely rehash the chair’s well-known opposition to Australia’s world-leading superannuation system, and failed Coalition policy proposals which are over a decade old.

1.6The chair’s two previous interim reports predictably targeted Australians’ superannuation savings through various unsupported proposals to expand the ‘super for housing’ policy from the Coalition.

1.7This third report, unsurprisingly, takes aim more specifically at Australia’s profit to member (or ‘industry’) superannuation sector, which the chair is opposed to.

1.8Regrettably, this inquiry has repeatedly failed to seek bipartisan or crossbench support for its proposals. Instead, the chair has given committee members less than 24 hours to properly consider, engage on and adopt the Coalition-majority interim report.

1.9This is not a bipartisan report, and no effort was made to make it so.

1.10Further, no effort was made to engage a broad range of superannuation stakeholders or governance experts on the substance of the issues presented in this interim report.

1.11Disappointingly, the chair did not open or call for submissions seeking views on the governance and operations of superannuation funds to inform this interim report and the chair’s recommendations.

1.12The key recommendation of this interim report is to water down existing statutory requirements for profit to member (‘industry’) funds that provide equal representation of employee and employer representatives, and independent trustees or directors on superannuation boards.

1.13This is a misguided effort from the chair to undermine the representation of employees, through trade unions, and Australian industry, through employer groups, on profit to member (‘industry’) superannuation fund boards.

1.14Providing evidence at a public hearing of the inquiry, Cbus’ Independent Chair Wayne Swan explained the importance of the equal representation model in these terms:

It brings a reality and a life experience to the board that wouldn't otherwise be there. In the case of Cbus it makes us very close to our members, which is why we run our partnership programs, for example. They are aimed at not only educating our membership but at retaining and increasing membership. For the directors on the board who are in contact with delegates or with employers, being out there on the job and talking to our members is absolutely essential.[1]

1.15Government senators support the existing equal representation and profit to member model because it delivers the best results to fund members. The results of this model over time speak for themselves.

1.16Around 70 per cent of superannuation members have chosen to be in a superfund with equal representation.

1.17In the last 20 years, returns in profit to members funds have performed better than retail funds by 1.6 per cent – this equates to almost $200000 more in retirement

1.18Over the last decade, the top ten performing funds have all been profit to member (‘industry’) superannuation funds.

1.19In seeking to water down this model of success, the chair is asking for Australians to risk lower returns, poorer performance and less retirement income.

1.20Further, there is no evidence to support a view that the board composition of superannuation boards, and the apportionment of employee, employer and independent trustees leads to poorer member services. In many situations, the close relationship that trustees have to their membership and industry makes them more accountable.

1.21Another recommendation of the chair is for ‘shareholders’ of superannuation funds to have a statutory responsibility to pay fines.

1.22This proposal is flawed in its premises and fails to accurately comprehend and consider the various ownership and governance structures of superannuation funds and trusts. It is unworkable.

1.23Government senators note that the governance of the sector through the Superannuation Industry (Supervision) Act 1993, and independent work of the Australian Securities and Investment Commission, the Australian Prudential Regulation Authority and their regulatory guidance forms an important framework and set of standards for funds to work from.

1.24This guidance appropriately allows flexibility in how funds meet their governance standards and allows for them to be improved on.

1.25Government senators further note that Cbus, which has been a focus of this inquiry by the chair, has publicly outlined its engagement and cooperation with enforcement and investigations undertaken of ASIC and APRA.

1.26Government senators agree that there is room for funds to improve in how they provide services to members and support them through the retirement phase of their superannuation. Importantly, funds have already demonstrated a commitment to, and have acted to, improve their member services.

1.27Government senators note that after a decade of neglect and attacks by the Coalition, the superannuation system has been strengthened by the Albanese Labor Government. This includes:

Introducing mandatory and enforceable service standards for all large APRA regulated superannuation funds.

Lifting the Coalition’s superannuation guarantee freeze of 9.5 per cent, with the guarantee finally due to reach 12 per cent on 1 July 2025 – 6 years later than it should have.

Paying 12 per cent superannuation on government-funded Paid Parental Leave payments for eligible parents for babies born or adopted on or after 1 July 2025.

Improving the Retirement Phase of Superannuation to give retirees more peace of mind, supporting them to make the best use of their retirement savings and income, and to navigate different retirement income option and products.

Legislating the Objective of Superannuation as 'to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way'.

Committing that, from 1 July 2026, employers will be required to pay their employees' superannuation at the same time as their pay, to support timely receipt of superannuation and improve retirement outcomes.

Strengthening and expanding the performance test to ensure members receive the best investment returns through accumulation.

Legislating a new financial accountability regime which will, among other things, require all superannuation funds to nominate accountable executives to be responsible for superannuation service standards.

Expanding transparency in super by aligning financial reporting requirements with public companies and supporting the regulators to expand transparency over fund expenditure.

Undertaking the largest reforms to financial advice laws in over a decade to allow funds to deliver better service to members throughout their member journey.

1.28Government senators note the Coalition have demonstrated a concerning willingness to undermine the success of Australia’s superannuation and its critical role in delivering secure retirements, including:

Freezing the Superannuation Guarantee at 9.5 per cent in 2014, and leaving it frozen under the Abbott, Turnbull and Morrison governments.

Permitting Australians to raid their retirement savings without appropriate safeguards or care for the long-term financial implications during the pandemic, with $36 billion in lost retirement savings.

Instead of supporting housing supply measures, asking Australians to raid their superannuation to contribute to a house deposit. This will have the effect of inflating house prices, requiring larger home deposits and increasing mortgage payments and interest charges.

1.29Finally, Government senators note that the growth over the superannuation sector over the 32 years since its establishment has allowed people to retire with real wealth, security and dignity in retirement, particularly low-and moderate-income people. In many circumstances, they are the first to do so in a generation. Any changes to the sectors must be done so with a broad and bipartisan support, not in a rushed manner and with preconceived outcomes.

Senator Jess Walsh

Deputy Chair

Labor Senator for Victoria

Footnotes

[1]Mr Wayne Swan, Chair, Cbus Super, Committee Hansard, 29 November 2024, p. 4.