PETER RYAN:
Kelly O’Dwyer, what’s wrong with the way default super, what’s known as MySuper, is run and managed at the moment?
KELLY O’DWYER:
Well Peter, there aren’t enough protections at the moment to ensure that superannuation is being managed in the best interests of members. We need to give every day Australians more control over their superannuation providers. We need to make sure we have an even stronger regulator to make sure that the foundations are right and that it works in interests of members for their retirement income.
PETER RYAN:
So just where are the big trouble spots? What do you want to change?
KELLY O’DWYER:
Well, one of the things that we want to make easier for people is we want to make it easier for people to opt-out of automatic life insurance. At the moment, that’s one of the default settings in superannuation and it’s very hard for a lot of Australians, and there are more than 2.7 million Australians who have more than two accounts, to be able to opt-out of their insurance. The reason this is important is because so much of their retirement income in the future can be eroded through fees and charges and you’d be horrified to learn that in today’s day and age, a lot of people can’t simply pick up the telephone or get online and simply opt-out.
PETER RYAN:
And this is the problem of life insurance in super being pretty much a set and forget. But people can opt-out at the moment, but you’re saying it’s just not simple to do it?
KELLY O’DWYER:
Well, some people have to pick up a pen and piece of paper and post it in in order to actually opt-out. It can be a very difficult process for people, and this is particularly a problem for younger members, people who have got part-time jobs, maybe working for a supermarket, they might have a part-time job as well being a tutor, they’ve got multiple funds, multiple sets of fees, and a lot of those younger Australians don’t realise that they’re paying premiums that they would never get the benefit of.
PETER RYAN:
One of the reforms you’re looking at as well, I understand, is a new outcomes test where funds have to write up how the financial interests of members are being promoted. How will that work and how will that be enforced?
KELLY O’DWYER:
Well, we believe that the existing scale test simply doesn’t provide enough confidence for members to ensure that they’re getting the most out of their superannuation. So we’re looking at how we can focus on outcomes so that the default MySuper products have an annual assessment where they have to look at the investment insurance strategies, the fees, the returns, and whether or not they’re promoting the financial interests of their MySuper members. And that’s going to be a very public process, it’s going to give APRA, the regulator, stronger powers to be able to look at all of those things.
PETER RYAN:
In terms of that enforcement, as you said you are giving the prudential regulator, APRA, wider powers but just how wide will those powers be in terms of supervising funds and trustees?
KELLY O’DWYER:
We’re going to give APRA the power to be able to refuse or cancel a MySuper authorisation where it believes the licensee has failed to meet its obligations. We’re actually also going to give them sweeping new powers to be able to get involved if they think that there are problems with the fund. We’re giving them a directions power to take preventative and corrective action if they’ve got prudential concerns about a fund and if they’ve got concerns that the fund is not acting in the best interests of members.
PETER RYAN:
So APRA would have the ability to deregister a fund that doesn’t deliver, call them to account and scrutinise the way they’re managing these investments?
KELLY O’DWYER:
That’s right.
PETER RYAN:
Now your focus is on default super contributions, that’s the 9.5 per cent that employers put aside for workers, but industry funds have complained for some time that employers receive incentives sometimes from banks to park this MySuper money with them. Are you going to be tightening up those rules about those type of incentives that may be tempting for some employers?
KELLY O’DWYER:
Well we’re certainly tightening up on the superannuation guarantee and how unscrupulous employers can short-change their employees. And we’re particularly focused on changing salary sacrifice contribution arrangements that currently exist. There’s a loophole that exists right now that allows employers who are not doing the right thing by their employees to be able to count that as part of their contribution for the superannuation guarantee. We’re going to scrap that and make sure that people get their full superannuation guarantee plus anything else that they salary sacrifice.
PETER RYAN:
And the Government’s been very busy fighting off Labor’s call for a royal commission into the way that banks operate. So how will these tighter rules around superannuation help you in achieving that mission?
KELLY O’DWYER:
Well the Government’s also focused on making sure that we clean up the scandals that have existed within the banking sector as well. We’re making it much easier for consumers to be able to access justice in a timely manner. The Government’s already announced a one-stop-shop for consumer complaints, which will allow this particular new one-stop-shop to be able to provide binding resolutions, an independent arbiter, and compensation where appropriate. And we’re currently reviewing whether or not there ought to be a compensation scheme of last resort and we’re expecting recommendations to Government very shortly on that.
PETER RYAN:
And finally, just on fixed four-year Parliamentary terms, do you back that proposal?
KELLY O’DWYER:
Well, you know, if you have fixed terms you can either entrench good governments or bad governments. I think it’s an interesting question, I’m not sure it’s the highest priority of people when they’re thinking about the issues that affect them, but I’m very open to the discussion.