Today we are releasing a plan for the future of superannuation supervision in Australia. We want to make superannuation safer for 8.5 million Australians that have would have their largest lifetime investment wrapped up in superannuation. Our plan has a number of individual proposals. The first proposal is that it only applies to the 12,00-regulated superannuation funds. It does not apply to the 200,000 do-it-yourself superannuation funds. Secondly, we are focussing on how the super funds can be more accountable. We want prudential supervision to come from the Government down, and importantly, we want to empower the members of the superannuation funds to take more responsibility and more control of their superannuation. So the ways we are going to do it are, we are going to require all superannuation funds to be licensed. Second, we are going to require them to have capital. Therefore, they will have some money standing behind the superannuation fund apart from simply members' money. We are going to require all superannuation funds to hold annual general meetings. We are extending shareholder democracy to superannuation. Members will be able to hold the trustees accountable at annual general meetings each year for the way they are investing members' funds. We are also going to provide APRA with and extensive and larger range of powers so that they will be better able to protect everyone's superannuation in a more vigilant manner. We are also going to start requiring superannuation funds to start providing more information and public information to their members. This is a response to the very large growth of superannuation. Superannuation is essentially well run in Australia but it is so large now that it needs better protection. The Government should respond, and is responding with this options paper. I have asked Don Mercer, the former chief executive of ANZ Bank and a member of the APRA board to chair the working group, to consult widely with the super industry and particularly, with members to ensure there is better protection for every working Australian's superannuation.
Q: How much money will these licensed superannuation groups hold to have now?
MINISTER: That will be determined in the consultations over the next few months, but we expect that superannuation funds will need to be well capitalised to start responding to consumers' needs. It is no good having a superannuation fund fail and the trustees walk away and the members have no recourse to assets. It is unacceptable. We want members to have appropriate protection. This is about making superannuation safer for 8.5 million Australians.
Q: You say consultation is going on. How long before some of this become legislation and is enshrined in law?
MINISTER: We would want legislation by the middle of next year. This paper is out for consultation with all responses back by 1 February. We see this as a very important step forward. The trustees of superannuation funds need to be up on the stage answering questions from members about how the money is invested and where the money is invested. And members of superannuation funds need to be able to have recourse to go after peopleif they have not invested properly. This is a very important step froward in accountability. This is a very important step forward in holding people, particularly those people who run superannuation funds, accountable to their members. Now the Labor Party opposed choice of superannuation. We tried to introduce choice to so members could swap between funds. The knocked us off in the Senate. We tried to increase the penalty for funds not lodgling annual returns. The Labor Party tried to knock us off in the Senate, when we got it through they wanted to halve the penalty for superannuation funds that weren't lodging annual returns. It is not enough to have $500 billion out there being invested in this market. Superannuation is too valuable to Australia and is too valuable to our economy. Everyday superannuation is invested in the stockmarket, it is invested in real estate and is invested in businesses. Well, now we are going to hold the people that run superannuation more accountable. We are going to make sure that those people running it are not faceless but in fact, are fronting up to annual general meetings every year, responding to members' questions about how they have been investing and why they have been investing. And we would like to see members having the power to remove people if they are not doing their job properly.
Q: Why were these changes brought through? Were there concerns some of these companies could go belly up?
MINISTER: The rate of failure in superannuation is very small, thankfully, at the moment. However, it is my strong view and the Howard Government's strong view that always need to prepare for a rainy day. We don't know when that day might come. So, what we want is for superannuation to be safer. And that is vitally important. It is the security of Australians. And 8.5 million Australians rely on their superannuation for their retirement. Now, it is not good enough that we have strong controls on banking, strong laws and prudential rules for banking and yet we have more money in superannuation than we do in the banking system. And superannuation is less regulated than banking. It is going to be tough. It is going to be hard particularly for the industry funds. It is going to mean that the representatives of some of the workers on those industry funds, including union officials, are going to start to be held accountable for investment decisions. It is going to force those people to disclose and at times, seek approval, of members if they are going to engage in related-party activities. So if they are giving work to mates they are going to need to seek approval of members of the fund. The days of the cosy relationships in superannuation are now over.
Q: Are you confident that APRA has enough power giving that it didn't seem to be enormously effective over the HIH issue?
MINISTER: We are giving APRA an extra $5 million over the next two years to support the introduction of this regime and we are going to give APRA very extensive powers in relation to supervision of superannuation. I asked APRA to come to me with a wishlist. They came to me with this wishlist. We think it appropriate to consult with the industry, which we are going to do. But rest assured, that there will be no shortage of teeth for the superannuation watchdog after this paper is implemented.
Q: Mr Hockey, what sort of powers does APRA lack at the moment?
MINISTER: Currently APRA's powers are regulated by legislation and that means that legislation is slow and cumbersome. The Labor Party, which is very closely affiliated with the union movement obviously, which run a lot of industry funds, have blocked any attempt by the Government to try to tighten up the laws governing superannuation, We are going to put through legislation next year to pursue those people responsible for inappropriate acts. I should add, that in this paper at the moment, if there has been fraud in superannuation and it is in the national interest, then a levy could be placed on all superannuation to assist with the failure. I am canvassing extending that power misleading and deceptive conduct. At the moment the Labor Party's position is that they will only cover fraud. We believe it could be extended to misleading and deceptive conduct to protect people who are the innocent victims of wrongful behaviour by superannuation trustees and investment managers.
Q: Are you going to try reintroduce choice?
MINISTER: The Government remains firmly committed to choice, so that members of superannuation funds can choose who invests their money and where that money is invested. The Labor Party opposed choice primarily because they are very closely linked with industry funds run by a large number of union officials. If the Labor Party continues to oppose choice, as they have done, then we need to give members more individual power and the best way to do that is to hold annual general meetings and give them extensive power to remove people who don't do the right thing when they are managing more than $500 billion worth of peoples' money.