30 October 2019

Address to the Lonsec + SuperRatings Awards

Good evening, ladies and gentlemen. It’s terrific to be here at the Annual Fund of the Year Awards.

It’s a refreshing change to be talking about the best performing superannuation funds. A lot of the conversation has focused recently on the poor performers or the laggards of the industry, and the pressing need for change in the post Hayne Royal Commission world.

But occasions like this provide us with an opportunity to celebrate everything great about the superannuation industry — that is: funds that are providing outstanding service and delivering for their members.

We should also acknowledge that the recent Melbourne Mercer Global Pension Index rates Australia’s superannuation system among the best in world. So in many respects, tonight we are recognising some of the best of the best.


If you ask any of the award nominees here tonight, they will tell you their results haven’t occurred by luck.

More often than not, their results will have come about through hard work — a commitment to their members and a determination to keep ahead of the competition.

That’s where agencies like SuperRatings and Lonsec play a crucial role. In our superannuation system — a system beleaguered by disengagement and opacity — any tools that make it easier to compare and assess the players are essential.

APRA Heatmaps

In fact, in a superannuation industry that has grown to around $2.9 trillion, there are many different ways to shed light on performance.

Good performance has two components – the investment performance side and the fees and expenses side. The best investment performance can be completely outweighed by fees that disproportionately high.

While we’re here celebrating the top performers of the super industry, we know that system wide costs are still too high.

According to OECD analysis, Australia’s superannuation operating costs are among the highest, despite us having one of the best private pension systems in the world.

Our administration and investment fees total around 0.8 per cent of total funds under management, compared with 0.1 per cent in the Netherlands – one of our closest competitors for the number one position in private pension systems.

It’s clear that more can be done to improve efficiency in our system.

We also know that fee and cost disclosure and transparency continues to be issue for the industry.

For these reasons, the Government is always considering the best and most effective ways to measure performance.

As the year quickly draws to a close, APRA is finalising plans to publish a heatmap of the performance of all MySuper products.

The heatmap will be designed to provide clear, simple insights into how trustees are performing initially for the MySuper sector and then expanding to choice products over time.

Performance heatmaps will be a familiar concept for many sports fans with TV networks using the power of data to analyse everything from Ash Barty’s ground strokes through to the accuracy of Australian cricket team’s bowling attack.

While APRA is still finalising the methodology and measures, Deputy Chair Helen Rowell has said the heatmap will be a starting point for member outcomes and performance assessment.

Encouragingly, Ms Rowell said ‘the heatmap will present the data in a way that can be broadly understood by those who don’t have a degree in applied mathematics and statistics and won’t require a major in spreadsheet analysis to interpret’.

In practice, it will challenge the trustees of underperforming products to consider how to improve and take appropriate steps to lift their game.

This should provide an incentive for trustees of higher performing funds to continually work to outdo their competitors and deliver even better outcomes for members.

Member Outcomes

Then there is the Member Outcomes legislation – passed earlier this year by this Government - which provides transparency around funds’ performance in different, complementary ways.

First, the new law requires trustees to annually assess their performance and outcomes delivered for members.

Second, it requires superannuation funds to hold annual members’ meetings, providing an opportunity for members to ask questions of fund executives – similar to AGMs for listed companies.

And third, the legislation requires funds to make their investment information publicly available – in a workable portfolio holdings disclosure regime. This measure is particularly important for ratings agencies like Lonsec, as it will finally provide financial analysts access to information about the portfolio holdings of funds, while minimising the compliance burden on trustees.

Together, these measures heighten transparency and disclosure requirements on funds, as well as placing the onus on trustees to continually improve accountability and member outcomes.

This legislation also goes towards further strengthening protections for members by ensuring the best interest duty is always front of mind for trustees.


While transparency is obviously good for competition, unfortunately it counts for nothing for the workers who still have their choice of fund restricted.

The Morrison Government considers that given the compulsory nature of super, all employees should be able to decide where their compulsory superannuation goes.

Unfortunately, we know that there are agreements in place that restrict workers’ choice of fund.

Worse still, we know there are tens of thousands of workers that are being forced into some of the worst performing default products as a result of these restrictions on choice.

The arguments for choice of fund are clear. Not only is it good for competition, but restricting choice fails to take into account that each person has unique circumstances, which impact on which superannuation fund is most appropriate for them.

The key is that the employees should have the power to make this decision – not the employer, not a union, not the superannuation industry and not the Government.

Our policy has always been and remains that all Australians employed under federal enterprise bargaining agreements and workplace determinations should be able to choose their superannuation fund.

Protecting Your Superannuation

While tonight’s focus on the best performers of this industry, we know from the Productivity Commission’s recent report that the superannuation system is not without its flaws.

For example, recent data from the ATA shows approximately six million Australians hold two or more superannuation accounts.

In other words, that’s 3 in every 10 Australians that are paying two sets of fees and potentially two sets of insurance premiums.

As I argued in Parliament, inactive accounts can be eroded all the way down to zero for insurance cover that members may not know they have or may not be able to actually claim on.

I’m proud to be able to say the Government has already passed legislation to address some of most egregious issues that stem from holding multiple accounts.

Under the Protecting Your Superannuation Package legislation, the Australian Taxation Office will soon start proactively reuniting people’s lost or low balance and inactive accounts with their active superannuation accounts.

Importantly, the Protecting Your Super changes also cap administration and investment fees on accounts with balances of less than $6,000 at 3 per cent of the account balance, protecting these small accounts from ongoing erosion.

And we’ve banned superannuation funds from charging exit fees for any account, meaning members can more easily change their fund to a better performing one.

Putting Members’ Interests First

More recently, we passed the Putting Members’ Interests First Act – which means that low balance accounts and new accounts belonging to young members will be protected from erosion by unnecessary insurance premiums.

The changes in this Act will prevent members from paying for insurance they do not know they have, goes beyond they need or may not even be able to claim on.

Importantly, we developed a targeted exception from these changes for members under 25 and those with low balances who are employed in high risk occupations and emergency services.

Superannuation funds have an important role to play in communicating clearly with members about these changes. Ongoing communication between funds and members will help people understand their individual insurance needs.

This is an industry that constantly laments the level of engagement of its members – particularly the young - well here is an opportunity to address that, and to better understand exactly who it is whose best interests you are serving every day.

The Putting Members’ Interests First Act, together with the other measures in the Protecting Your Super Package, will mean millions of individuals will have the opportunity to save billions of dollars in insurance premiums by allowing them to choose to opt-in to this cover, rather than paying for it by default. 

Recovering Unpaid Super

I’d just like to also quickly mention the work this Government is doing to ensure workers receive all the superannuation they are entitled to.

We have introduced legislation to give effect to the superannuation guarantee amnesty, announced last year.

The Bill will introduce an amnesty to encourage employers to come forward and pay historical superannuation guarantee debts, including interest, in full.

Let me be clear: it does not reduce employees’ entitlements by one cent. Everything that an employer owes to its employees must still be paid.

Moreover, increased penalties and the universal application of single touch payroll means that the opportunities for inadvertent underpayment and recrimination for intentional underpayment in the future are dramatically diminished.

The amnesty only provides a one-off waiver of charges which would otherwise be paid to the Government. It will result in tens of thousands of workers receiving superannuation payments they otherwise would have missed out on and higher balances in retirement as a result.

Closing remarks

I’m starting to sound like a broken record on this but it’s incredibly important. If nearly one dollar in every ten – and soon to be more with the legislated rises in train – of workers’ earnings is to be locked away compulsorily – at the government’s direction – for up to 40 years into the future, then government has a moral obligation to ensure the compulsory retirement savings system is as efficient as possible.

In this system, the Government is the only advocate for members as just about every other player has a vested interest.

We’ll keep building on the changes we’ve already made to ensure the industry is held to the highest standards to accountability and transparency, and to ensure that the system is working for all members.

There’s no doubt that policy changes we make now are going to define the trajectory for the industry for the coming decades.

So when I think about the upcoming policy decisions – like default allocation, dealing with multiple accounts, or retirement income arrangements – I keep in mind what I want our system to look like in another 30 years.

I’d like to see a superannuation system that is competitive, efficient and dynamic.

I’d like to see people who are disengaged from their super defaulted into high-performing funds that act in their best interest.

At the same time, I’d like to see more people become more engaged with their super, becoming more aware of their fees and returns, and taking an interest in their retirement income.

And while we have all given a lot of focus to the accumulation side of the superannuation system, I’d also like to see a system that delivers the best outcomes for members in retirement as well.

I’d like to see trustees – who are legally bound to act in the best interests of their members – ensure that members have options to draw down on their retirement savings in the most efficient way possible.

I’d like to see governments for the next three decades support people who want to be self-funded in retirement, and ensure that our superannuation system is sustainable in the face of an ageing population.

I’d like to see the gap closed between men and women’s superannuation balances.

Above all, I’d like to see a system that delivers the best possible outcomes for members.

On that note, ladies and gentlemen, I would like to congratulate all the award nominees and winners.

It is terrific that SuperRatings recognises those of you who are ‘truly delivering for members’ and those who are at the cutting edge of innovation and social responsibility.

Thank you very much and enjoy your evening.