TOM CONNELL:
Assistant Minister for Superannuation and Financial Services, Jane Hume joins me from our Melbourne studio. Jane Hume, thanks very much for your time. You've been busy this week talking about insurance in superannuation, the proposal that the Government wants to push again, make it opt-in for those people aged 25 and under. Are there any other triggers, for example, if someone gets married you wouldn't want a partner left in the lurch, maybe that would be another time when they'd been foisted more onto superannuation?
SENATOR THE HON JANE HUME:
Yeah, well, let's take a step back first, Tom, because there's some pretty significant changes to superannuation that are going through next week. 1 July we'll see a banning of exit fees for all funds, so that people can switch between funds more easily. We're seeing a capping of fees for balances below $6,000 to make sure that people with low balances aren't getting their accounts eroded. We're seeing an opt in for insurance in dormant accounts, and we're also seeing the ATO consolidate duplicate accounts. So that all happens from July 1. There's some pretty significant changes. There are still some more changes to go ahead and that's what I've been talking about this week. In particular we want to see people that are under 25 have their insurance in superannuation opt-in so that their balances don't get eroded by insurance premiums on insurance that they're very unlikely to claim.
CONNELL:
Yeah, unlikely but what about the other example, say, someone gets married at 22, should that trigger some other sort of reminder you've got a partner, then you're obviously in a situation where you're no more likely to die but if you do, you would want your partner to be left with something?
HUME:
I think the most important thing is that, you know, look, people have to take control of their own financial security, their own financial future and, you know, if you are getting married or you have children or all those sort of things there's nothing preventing you getting insurance within your superannuation but it's an opt in, you know, system, rather than an opt out system.
CONNELL:
It's just something so many people set and forget, though, isn't it?
HUME:
That's exactly right, it is, that's true. But the vast majority of people under 25, at this stage, they should be trying to accumulate a balance so they reach a critical mass so their balances aren't eroded by those unnecessary fees and insurance premiums.
CONNELL:
The biggest impact we often hear, you know, some people agonise over the type of investment but the biggest impact are the fees they have. Are fees still too high in Australia and what can you do about it?
HUME:
Yeah, they are too high. I mean, by global standards certainly our superannuation fees are still significantly high. They have come down in the last decade or so, I think, from around 1.4% to 1.1%, but on a global level that's still way too high. The Productivity Commission, who recently did a review into the efficiency of the superannuation system, have come back with a series of recommendations as to how to make the system more efficient, more competitive and that's something that the Government will be responding to within the next few weeks. Also Commissioner Hayne came back with some suggestions as to how to make the system more effective, making outcomes better for members, and that included things like stapling a superannuation account to the member as opposed to having a series of default funds that you go into when you change jobs, and getting rid of that duplicate account system. So these are all things that the Government is going to respond to. The most important thing that we can do, though, is make sure that our superannuation system, which is the envy of the world – it's $2.8 trillion worth of Australian savings – is as efficient as possible; because at the moment we're compulsorily quarantining nearly one dollar in ten of every worker's pay packet to put away for potentially up to 40 years. So we have an obligation: a government in all good conscience couldn't demand that people should put more into superannuation unless it was an efficient system.
CONNELL:
And just on that, so you're calling for super to be basically fixed and the industry, the retail funds to come onboard. Are you locked in all the way to this increase out to 12%? Is that something that you'd consider changing the path of at all?
HUME:
Look, that's legislated, the increase of the superannuation guarantee is legislated to 12% starting in 2021 with a move from 9.5% to 10%. I think that that lends a level of urgency to the reform message. We have to get onto this really quickly and make sure it's an efficient system so by the time the government requires you to give up more of your hard-earned dollars to put away from your retirement, that it's going into an efficient system.
CONNELL:
But you are locked into that 12? Figures out today suggest already we've only got about a quarter of retirees that are hitting pensionable age on the full pension, so super is working pretty well at a lower level. Are you totally wedded to 12%?
HUME:
Yeah, look, one of the initiatives that was suggested by the Productivity Commission was that the Government undertake a retirement incomes review. The Treasurer has flagged that the Government is very open to doing that and we're considering the options of that at the moment. And that retirement incomes review will look at the interaction of our superannuation system with the aged system, the impact of superannuation on national savings and that will give us a much better picture as to how the superannuation system will grow going forward. I mean if you think about it, it's only 27 years old now and it still isn't a fully mature system. So I think that this is really important for the future prosperity of all Australians.
CONNELL:
And so that review, then, does that look at 12% as well and if that is the right figure?
HUME:
The terms of reference haven't been worked out for that review yet. At this stage, today, those increases to superannuation guarantee are locked and loaded and legislated.
CONNELL:
But that's a huge lever. Would you be happy for that to be looked at as part of it?
HUME:
Look, to tell you the truth, they're legislated. They're already there, they're happening. What I want to do is make sure that Australian's money is going to an efficient superannuation system and that there is a level of urgency attached to that so we can have those stepped changes in superannuation guarantee.
CONNELL:
One of the other big issues is underpaid super. It's very hard to check. If you log onto your super account, sporadic amounts essentially go in from your employer. They don't go in at the same time as your pay, it's not the same amount each month. Are you open to changing that so every worker out there can very easily check if they're getting paid their super?
HUME:
I'd love to be able to change that. At the moment superannuation is paid quarterly, whereas you could potentially be paid fortnightly or weekly, whatever your system your employer's system is. A single touch payroll will make that much easier for employers to allocate superannuation at the same time as their pay and it should prevent further incidents of underpayment of superannuation. So I think that that's an efficiency that we could certainly look at. We have to make sure that technology is available to be able to, you know, allow that to happen.
CONNELL:
It's just a question of businesses getting that technology, isn't it, and possibly a cost to the budget is my understanding, but are you open to that?
HUME:
In an ideal world, wouldn't it be terrific if you could look at your phone and there was your superannuation account that went up at the same time as your pay, there was your pay your transaction account that went up at the same time as you got paid. That should be available eventually. That's what we would want in an ideal and efficient system. It's going to take some time. We're not there yet but that would be the ultimate goal, wouldn't it?
CONNELL:
Just finally, I'm sure you were sitting there with the popcorn watching 'Bad Blood' last night. What did you make of Concetta Fierravanti-Wells saying, well, you had these Morrison supporters vote for the spill to make sure their man got the job?
HUME:
Can I say hand on heart, Tom, I got off a plane really late last night. I did start watching it but I didn't quite finish it so, look, I think that and you and I have had this conversation before, I would really like to consign that period of Liberal Party history to the history books and I think that what we've seen since is a unity and a stability that will take us forward into the future. The Government is now focused on delivering its commitments that it promised the Australian people during the election, delivering tax cuts, a strong economy.
CONNELL:
But, yeah, of course, it is, but this goes to the claim of Scott Morrison to say I'm in the job but I didn't try to get it, doesn't it?
HUME:
Everybody's perceptions of that week in Liberal Party history will be different. Certainly I have a different view to many of my colleagues. Our experiences were all different. The important thing now is this is a very unified party and we're working together to deliver the best outcomes for Australians.
CONNELL:
Jane Hume, thanks for your time.
HUME:
Good to be with you, Tom.