Good afternoon Ladies and Gentlemen
I would like to thank the Queensland Division of ASFA for this opportunity to issues that are central to the Government's approach to superannuation. I would also like to thank the sponsors of this event AMP, Permanent Trustees and the Queensland Investment Corporation.
About one hour south of here is my idea of retirement. The Gold Coast.
Not necessarily for the perfect climate or the beautiful beaches.
No, it is because there are some 45 top-class golf courses pretty much within a Tiger Woods wedge shot of each other.
What appeals to me is being able to choose a different course almost every week of the year.
However, dreams such as mine, and dreams of millions of other Australians, will remain just that, unless we have enough money at the end of our working lives.
That is, unless we are adequately superannuated.
Superannuation provides a benefit for the most important asset Australia has - its people.
People who contribute throughout their working lives, helping to build a vibrant and economically sound society.
All of us here today contribute in some way to the quality of that retirement benefit.
The decisions we make today, from asset allocation through to tax policy, affect the future income of all Australians.
Over the last 20 years we have created a superannuation industry that empowers the workforce and empowers retirees to constantly upgrade the value of their retirement incomes.
They can choose super plans that suit their risk preferences and at the same time take advantage of generous tax allowances.
However, in a world where persistent and relentless change has become the standard currency, this is no time to rest on previous achievements.
Now, more than ever, it is essential that we are progressive and that we are innovative in our superannuation thinking.
This responsibility is great and our task should not be underestimated.
Other countries have found out that not adequately providing for retirees can result in massive, unfunded pension liabilities.
And these liabilities are a real and a growing threat to their economies.
Australia's greatest challenge will be maintaining a superannuation system that is sufficiently robust and sufficiently versatile to cope with our society's changing demographics.
Ladies and gentlemen, what I am talking about is the workforce of tomorrow.
Right now, there is a 1 in 3 chance that a girl born before the end of this year will experience life in 3 centuries.
Within a generation from now 25% of our population will have reached retirement age, as opposed to 9% less than generation ago.
The stark consequence of these statistics is a vastly larger population of retirees who will need to provide superannuation over a much longer time.
We owe it to future generations to make sure they can achieve this.
In this context our Government has been, and remains, a strong advocate of self-funded superannuation.
This is because the Government believes that consumers, properly equipped, are the best managers of their own economic well being. All they need are the right tools.
Part of my job is to help provide those tools.
As you know, my Ministerial responsibilities extend from Financial Services & Regulation to competition policy and consumer affairs.
In many ways consumer empowerment is the common thread that goes throughout my entire portfolio. It involves helping investors make more informed choices and reforming industries so you get better service, better products and lower prices.
The fuel that sustains this empowerment is the concept of consumer sovereignty.
There are four key elements to consumer sovereignty.
Protection - consumers must feel sure the Government has in place a legal system that will protect them.
Choice - all of us must be able to choose from a wide range of products and services.
Information - our workforce has the right to be educated and informed about the different products available.
And finally, in cases when these standards are not met, consumers need immediate and effective redress to remedy unfair transactions.
Perhaps the most important of these is consumer protection.
Our super, along with our home, are probably our most valuable assets. Just as we protect and maintain our home, so to we need to protect and maintain our retirement income.
We realise that the loss, dissipation or mismanagement of super savings would result in a lower retirement income for those affected.
It would result in increased age pension outlays for the Government and consequently, an increased financial burden on future generations of Australians.
The super savings of individuals are placed into the hands of fund trustees. These trustees are charged with the critical responsibility of safeguarding the retirement savings of Australians.
The principle means by which the Government can protect the interests of fund members is through the prudential regulation of super funds.
Prudential regulation imposes obligations on trustees along with their fiduciary responsibilities.
Ladies and gentlemen, this Government is serious about protection for super fund members and has worked hard to put in place an appropriate framework for the prudential regulation of super.
As part of the Wallis reforms, the Government charged the Australian Securities and Investments Commission with the responsibility for regulating and supervising conduct, disclosure and consumer protection issues across the financial sector, including the super industry.
The Government also set up the Australian Prudential Regulation Authority (APRA) as the prudential regulator for deposit-taking institutions, insurance companies and super funds.
In other ways, too, the Government seeks to protect investors.
For example, last week we moved to address the issue of consumer protection on the Internet.
From now on all Australian companies will be issued with a digital certificate, which will for the first time, prove the identity of these businesses when trading on the web.
Consumers will also be able to verify identification by checking digital certificate numbers at the Government's business entry point website, which is a kind of de facto portal to Australian business.
So now, when you or I are surfing the net and come across, for instance, Paul's Pork and Pig Offal homepage we will be able to go directly to the government site and check that the company is properly registered and therefore, bound by all the laws designed to protect consumers.
Once consumers feel that a safety network exists to protect them they can then begin to explore the endless possibilities available.
Which brings me to the second leg of consumer sovereignty - choice.
That is, the ability for you and I to choose the most appropriate product at a reasonable price.
Technology continues to fuel an explosion of choice for all consumers, providing direct access to markets and products never available before.
And Australians have enviable record as far as take-up of new technologies. In fact, we embrace new technology.
We love mobile phones, and more and more of us are getting on to the Internet every day.
For instance, right now, with the use of a laptop and mobile phone I could pay my credit card bill, order tickets for a show in any city in the world, send flowers to my mother, and invest in the US stock market - all before this speech came to an end.
It is these technologies that are creating the conditions for an explosion in consumer choice.
The super industry has joined this revolution providing consumers with access to an ever-increasing range of products.
Products that can be tailored to a specific risk profile and adapted over a working life.
However, a major flaw in the existing super system is that individual Australians lack control over which fund is entrusted with their super savings.
Australians can choose the house in which they live. They can choose the car they drive. And they can choose the shares they buy.
Yet they have no general opportunity to choose their own super fund.
And this lack of choice is peculiar to the super industry.
Ladies and gentlemen, the Government believes that individuals should have a choice about who manages their superannuation savings.
And we are doing something about it, through a number of measures.
First, the Government has introduced choice of funds legislation. The Assistant Treasurer recently announced that the start date for choice of fund for new employees would be deferred. Nevertheless, I stress that the Government remains strongly committed to choice of fund.
Second, the Government is committed to allowing portability. By the year 2000, we want to see employees in accumulation funds being able to move their benefits into their fund of choice.
And third, following recent travels to the US, we have decided to allow US pension funds access to the Australian super industry. This will be through introduction of the Foreign Investment Fund Regulation initiative.
Already, we expect that a large international fund manager will be making an announcement concerning new products of this type some time in the next few days.
These initiatives will increase pressure on super funds to reduce fees and reduce charges.
If fees and charges do not fall the funds will have to explain why, or risk losing business.
To justify not only fees and charges, but also why their product is the best funds will have to provide more of the third element consumer sovereignty - information.
With the expected increase in choice that allowing US funds into Australia will bring, we can draw two clear conclusions from their experience.
First, US pension funds operate on much smaller margins than their Australian counterparts, and second, they devote a lot more time and money educating their consumers.
Regardless of what direction fee structures go I believe that Australian financial institutions need to take a much stronger approach towards educating Australians about the true cost of their products.
The Government believes that consumers are entitled to sufficient information to allow thorough and rigorous comparison of the products and services available.
Unfortunately, many complaints to industry dispute resolution schemes can be traced back to inadequate disclosure about various products.
Indeed, the recently released annual report of the Financial Services Complaints Resolution Scheme found the lack of proper risk disclosure was the crucial factor in customer dissatisfaction with investment advice.
The availability of an effective redress mechanism for super fund members is the final, yet no less crucial, element of consumer sovereignty.
It would be my aim that most queries and complaints about employee super could be solved by the fund trustee or an adequately empowered industry body.
However, we need to acknowledge that while our objective is admirable, the consumer must have the option of going to an independent body if they are still not satisfied.
This body should include government and industry representation and have the authority to solve disputes to the satisfaction of both parties.
The Superannuation Complaints Tribunal was set up to handle complaints about super fund trustee decisions and conduct enquiries in a fair and a timely manner.
I am currently considering new appointments and reappointments to the Tribunal, and I will ensure the Tribunal continues to be equipped with people who have the necessary skills, the necessary expertise and the necessary commitment to protect consumers in the event of any dispute.
Redress therefore complements and strengthens the other three key elements to consumer sovereignty - protection, choice and information.
Ladies and gentlemen, consumer sovereignty is an exciting concept, which I think brings great rewards. But with its rewards comes responsibility.
Responsibility for the Government to provide an effective legal framework for consumers.
And responsibility for consumers to investigate options and make informed choices.
I believe that with hard work and some astute decisions, all our retirement dreams may come true.
You never know, one day you may find me negotiating the gently undulating fairways of Hope Island, or tackling the treacherous rough of Robena Woods.
Thank you.