Not just choice, informed choice
I thank the Committee and the Secretariat for their work in relation to the examination of this bill.
This bill is about worker’s choice. At the moment, some workers are denied the opportunity to individually select the super fund that their employer compulsory superannuation contributions are paid into. This is particularly the case when the choice of super fund is embedded in an Enterprise Bargaining Agreement (EBA).
Lack of choice is not the only issue the bill seeks to remedy. It will also address circumstances where a person may end up with more than one super fund account (because one is mandated because of an EBA, whilst other preferred super funds are active), meaning they are paying multiple fees and may be paying multiple insurance premiums.
Centre Alliance strongly supports the principle that workers are entitled to choose their super fund. Workers should have the freedom to manage their retirement savings as they wish.
Recommendation
That the bill be passed with amendments.
Collective Choice
The Electrical Trades Union of Australia and others oppose the bill as they see it unfairly taking away the rights of workers to bargain for their preferred super fund in the workplace.
They and others suggested that the bill will erode the ability for workers to benefit from ‘collective choice’, where a ‘collective choice’ was a choice of super negotiated into an EBA by a union.
Whilst such a ‘collective choice’ is voted on, the vote does not have to be unanimous. This approach denies those who dissent such a choice. It also does not cater for new workers who arrive on the scene after the EBA has been negotiated and have no opportunity to have any real say in the ‘collective choice’ that is in place.
The issue was explored by the Committee and it was found that the bill does not prevent a collective choice being offered. A ‘collective choice’ can be made by nominating a default fund. Mr Mitchell, representing the Workers' Capital Lead, Australian Council of Trade Unions, confirmed this was the case at the hearing:
ACTING CHAIR: Let me try it this way: under this bill, can a workplace and a union agree on a default fund in an enterprise agreement?
Mr Mitchell: Yes.
The Financial Services Council advised the committee that there are super funds which are mandated, as a result of enterprise agreements, and their performance is not particularly good when compared across the entire range of super funds available.
This bill strikes a good balance. The collective can choose a default fund (and note that, according to the Financial Services Council, “... most Australians don't engage with their super and remain with their default fund”). Those that dissent or are aware of better performing funds can make a different choice. Those that arrive on scene after the ‘collective choice’ has been made can benefit from the ‘collective choice’, or choose otherwise.
Informed Choice
However, I am cognisant that you can give people a lot of choice but without proper information they can go on to make a rotten choice.
Numerous submitters and witnesses raised concerns about this.
The Chartered Accountants ANZ said:
… access to quality and timely financial advice has always been difficult but the recently enacted financial advice reforms will make this task even more difficult; and an urgent solution to this problem needs to be identified and put in place.
Super Consumers Australia argued:
… that giving people choice alone will not in itself drive competition in the superannuation market. They argued that further pro- consumer measures which break down information asymmetry and help people end up in better performing funds are needed.
… that funds be required to publish simple, single-page product dashboards for all superannuation investment options and standard machine readable versions of this data be made available by June 2020.
The Self-Managed Super Funds Association believed that all employees should be provided information about what choices they have in the superannuation sector available to them.
One option would be to encourage workers to seek their own financial advice. This was canvassed at the hearing. The Financial Services Council said:
I couldn't tell you specifically on choice of superannuation. I believe it's around an average of $3 1/2 thousand to get a full suite of advice. If you go to a financial adviser about all of your financial affairs, and your insurance could be part of that, that generally costs about $3 1/2 thousand. That's obviously quite expensive, and that's something else that we do have concerns about.
The Government must put in place a regime that mandates the publication of independently vetted and approved standard dashboards. In addition, a more detailed heat map as currently produced by APRA should be available so that workers can be informed about the available choices and their respective performances in the market.
Recommendation
The bill be amended to require a formal ‘dashboard’ and ‘heatmap’ regime to inform workers of their super choices.
Defined Benefit Schemes
The Committee recognised that there was the possibility that the bill might cause some unintended consequences for Defined Benefit Schemes.
The Committee states in main report that:
... changes may emerge over time and the committee believes that it would be prudent to review the status of defined benefit schemes after a two-year period to ascertain if there have been some unintended negative consequences.
The Committee made a recommendation that a review occur but did not propose that the review be legislated.
Recommendation
That the bill be amended to include a legislative review after 2 years by APRA, involving industry consultation, into the effect and any unintended consequences of the passage of this bill on Defined Benefit Schemes.
Rex Patrick
Senator for South Australia