5 years ago
ADDRESS TO THE SUPERANNUATION CHAIR FORUM
CLARE O’NEIL MP
Thank you for inviting me to speak to you today. I want to acknowledge that we are meeting today on Aboriginal land and I wish to pay my respects to elders past, present and emerging.
Well, we are still only in January, but it’s already been a huge year for superannuation. A few weeks ago, the Productivity Commission handed down its 700-page final report into super – the culmination of years of hard work. And this week, the Hayne Royal Commission will deliver its final report to government.
Alongside these inquiries there has been a drumbeat of demand for change. Many Australians want our superannuation system to be fairer, stronger and better. I am one of them. And I sincerely hope that Labor is given the opportunity at the next election to lead this reform. Because my main message for you today is that we are working on a broad, significant agenda for superannuation reform which I believe is necessary and urgent. It is a reform agenda that we should all be pushing for – everyone in this room, every type of fund. Reform is needed to retain public trust in super, and public trust is essential for its survival.
Before we begin, I want to contextualise the current discussion. Superannuation has issues – we can be in no doubt about that. Even with all these issues, super ensures that millions of Australians retire in more comfort than they would have otherwise. It is a policy we are entitled to feel proud of, but one that clearly needs to be strengthened and protected.
And I want today to talk about some of the priorities Labor will have in that task. The motivation that drives the changes Labor will be seeking to make is putting member’s interests first.
First, we are calling time on underperformers. The biggest problem facing Australian superannuation today is poor performing funds, the many Australians who are defaulted into them each year, and the millions of Australians stuck in them. And we are not going to allow this to continue. On this, my commitment, Bill Shorten’s commitment, Chris Bowen’s commitment, is resolute.
A future Shorten Labor Government simply will not stand by while millions of Australians have their saving eaten up by poor performance or fee gouging. The worst examples are totally unacceptable and wrong. In some instances it is clear that Australians would have been better off with their money sitting in a normal savings account than investing it in a super fund. Every Australian should be outraged by this. I certainly am.
Bill, Chris and I feel strongly about this subject because of the nature of super. Super is different from many other financial investments. Members are compelled by law to save. How Australians end up in one fund or another is, for many, not much more than a lottery. And the best evidence tells us that Australians are not actively engaging with their super until late in their working lives. When you put these features together, there is a clear need for a strong legal framework to ensure good performance. We do not have this today. And making some tough decisions about we regulate for this in future is going to reap huge benefits for Australians in the decades ahead.
The Productivity Commission recently found that a member entering the system today into a MySuper product in the bottom-quartile could retire with more than half a million dollars less than they would have had if they were in a top-quartile product. This is a genuine scandal.
What it means is that if we can get the legal framework right, it’s possible millions of Australians could end up with hundreds of thousands of dollars more in their retirement. That’s big bang for buck.
There are a number of proposals on the table for how we could default more Australians into quantity superannuation funds – from the Fair Work Commission, to best in show, to an expanded role for the Future Fund. We will have more to say about this over the coming months – of course, like you, I am awaiting the outcomes of the Hayne Royal Commission – whose recommendations I do not want to pre-empt.
A lot of the public discussion has been about the default system. But we need to pay equal attention to the millions of Australians who are already in a fund, but that fund is delivering poor returns to the member.
According to the Productivity Commission, in the default market alone, about five million member accounts and $270 billion in assets are in underperforming funds. One of the biggest factors in underperformance is fees. Australians are paying over $30 billion a year in fees – and that’s excluding insurance premiums.
High fees hurt members. They reduce members’ returns, and ultimately members’ retirement incomes. They are the biggest drain on long-term net returns across funds. Even a fee just 0.5 percentage points higher can cost a typical full time worker $100,000 by retirement. The Productivity Commission has also found that “funds that charge higher fees typically do not deliver better net returns over time to members.” Underperforming super funds, high-fee funds with poor returns, are not protecting members’ best interests. Some of these funds are ripping Australians off, essentially pilfering. Again, this is a scandal, and Labor will not tolerate it.
Trustees owe a duty to their members. This is not about industry, retail or corporate funds. It is about members. And if a fund is delivering returns to members consistently in the bottom quartile, something is going wrong, and Labor is going to act to fix it.
Fund performance is what impacts the most Australians. But I also want to make some comments today about misconduct in funds. Again, public trust is crucial to this sector. And there has been some conduct which has shaken that trust.
The Hayne Royal Commission has uncovered appalling, unacceptable misconduct by superannuation funds – conduct which is completely at odds with members’ interests.
These include very disturbing conflicts of interest, trustees unaware of the nature of their legal obligations, charging fees for no service, keeping regulators in the dark and paying compensation to superannuation members using their own retirement savings. This kind of conduct must be stamped out.
And I am eagerly awaiting the Royal Commission’s findings and recommendations about how we can clean up misconduct in the superannuation sector. And as Chris Bowen said just last week, Labor’s default position will be that if the Royal Commission recommends something, unless there is a good reason not to implement it, it should be done.
Universality is another issue that Labor has already announced policy on. Because it is clear that our superannuation system is not working equally for all. We know that super is tending to exacerbate existing inequalities in the workforce.
If you are male, with a steady job and good pay, generally our system works pretty well for you. But if you are a woman, if you take time out from the workforce, if you work part-time, casually or in non-standard employment, the system may not be working so well for you. This is something I want, Labor wants, to address.
We have announced a number of superannuation policies for the election to make superannuation fairer. Last year, I was so proud to stand with Bill Shorten, Tanya Plibersek and Chris Bowen to announce Labor’s policy for women in super.
On average, women currently retire with superannuation balances more than forty percent lower than men. In 2015-16, the superannuation gender gap was over $113,600. This is not fair.
If elected, Labor will introduce a suite of reforms that will work towards closing the super gender gap. These include paying superannuation on Commonwealth Paid Parental Leave and Dad and Partner Pay payments – because nobody should be penalised for taking time out to have children.
If elected, a Shorten Labor Government will also phase out the $450 minimum monthly income threshold for the superannuation guarantee, make it easier for employers to make extra payments into a woman’s superannuation fund and ensure the Government considers the impact that any future changes to super would have on women. I hope we get the opportunity to work with unions, employers and the industry to make the structural changes necessary to start breaking down the super gap.
Australia also has a significant issue with unpaid super. Industry Super Australia statistics recently revealed that in a single year, an incredible 2.98 million Australians experienced some form of non-payment or underpayment of super. These workers were losing out on $5.9 billion in money that they were owed.
What worries me even more is the way that this issue disproportionately affects particular groups. According to ISA, 75 percent of workers affected by unpaid or underpaid superannuation are under 35, earn under $30,000 or are in blue collar jobs. Workers in certain industries are also far more likely to miss out. ISA found almost half of labourers, machinery operators and drivers collectively missed out on more than a staggering $820 million in just one year.
The current system for claiming unpaid super isn’t working. It’s inefficient, it’s opaque, and too often fails to get workers back the super they are owed. I want to give you some examples about the real-life impact of this problem.
One recent example was of a woman who worked a Melbourne café and was paid less than the minimum wage and therefore underpaid superannuation. When she complained, her shifts were cancelled and she was threatened with a lawsuit.
Another is woman who – despite a 20-year career as a chef – only had $3,000 in super. Her last job paid her cash in hand below the minimum wage, with no super.
These stories trouble me greatly.
And, if elected, a Shorten Labor Government will take urgent steps to rectify this problem. This includes placing the right to superannuation within the National Employment Standards, strengthening the ATO compliance regime and increasing penalties for employers for underpayment or non-payment of superannuation.
Labor’s policy will make a big difference. Including superannuation in the NES give the powers to workers and their representatives to get their super back through Fair Work or the courts – regardless of whether they are working under a contract, award or another industrial agreement. It will let workers to pursue claims collectively, it will speed up the processing of super claims, and it will allow workers and representatives to inspect records of super payments – as they can do with wages.
It should not just be up to workers and unions to fix Australia’s unpaid super problem – it’s time for the government to act. That’s why Labor has also committed to strengthening the current ATO process. If elected, Labor, will be pushing the ATO to take a more active, rigorous approach to Superannuation Guarantee compliance. We will require the ATO to publish an annual report on the non-compliance with super – including information on the penalties imposed on employers who breach their SG obligations and a gender breakdown of unpaid super. We will also hold ourselves to account – requiring the relevant Minister report to Parliament each year on progress to address the issue of unpaid superannuation.
Finally, Labor if elected will also crackdown on employers who avoid their SG obligations. We want to see Part 7 civil penalties increased from 75 percent to 100 percent of the amount for employers who underpay because they made a false or misleading statement, and from 200 percent to 300 percent for failing to provide an SGC statement to the ATO when required to do so.
We will also seek to tighten the ATO’s discretion to reduce penalties. Information provided on notice by the ATO showed 80 percent of the 25,000 employers who failed to pay SG on time attracted no penalty at all. This isn’t good enough.
As is probably inevitable in a speech at this particular moment in our conversation about super, I have focused on some of the big issues that we will need to tackle. I want to acknowledge that there are some good things happening in super – funds performing brilliantly, providing high returns at a low cost, and leaving members with a significantly higher standard of living than they otherwise would have had. This is a worthy, significant achievement.
Labor wants the chance to strengthen and improve Australia’s superannuation system. We have a very to real shared interest in tackling this task head-on, and I feel confident that if Labor engages strongly with you on the reforms we propose, you will come with us on this.
Standing up for ordinary Australians is Labor’s mission. And there is a clear reform project here on superannuation that will help more Australians retire with a better quality of life. That’s what we’re all here for, and I very much hope that we have the opportunity to work together towards this goal.
ENDS
Well, we are still only in January, but it’s already been a huge year for superannuation. A few weeks ago, the Productivity Commission handed down its 700-page final report into super – the culmination of years of hard work. And this week, the Hayne Royal Commission will deliver its final report to government.
Alongside these inquiries there has been a drumbeat of demand for change. Many Australians want our superannuation system to be fairer, stronger and better. I am one of them. And I sincerely hope that Labor is given the opportunity at the next election to lead this reform. Because my main message for you today is that we are working on a broad, significant agenda for superannuation reform which I believe is necessary and urgent. It is a reform agenda that we should all be pushing for – everyone in this room, every type of fund. Reform is needed to retain public trust in super, and public trust is essential for its survival.
Before we begin, I want to contextualise the current discussion. Superannuation has issues – we can be in no doubt about that. Even with all these issues, super ensures that millions of Australians retire in more comfort than they would have otherwise. It is a policy we are entitled to feel proud of, but one that clearly needs to be strengthened and protected.
And I want today to talk about some of the priorities Labor will have in that task. The motivation that drives the changes Labor will be seeking to make is putting member’s interests first.
First, we are calling time on underperformers. The biggest problem facing Australian superannuation today is poor performing funds, the many Australians who are defaulted into them each year, and the millions of Australians stuck in them. And we are not going to allow this to continue. On this, my commitment, Bill Shorten’s commitment, Chris Bowen’s commitment, is resolute.
A future Shorten Labor Government simply will not stand by while millions of Australians have their saving eaten up by poor performance or fee gouging. The worst examples are totally unacceptable and wrong. In some instances it is clear that Australians would have been better off with their money sitting in a normal savings account than investing it in a super fund. Every Australian should be outraged by this. I certainly am.
Bill, Chris and I feel strongly about this subject because of the nature of super. Super is different from many other financial investments. Members are compelled by law to save. How Australians end up in one fund or another is, for many, not much more than a lottery. And the best evidence tells us that Australians are not actively engaging with their super until late in their working lives. When you put these features together, there is a clear need for a strong legal framework to ensure good performance. We do not have this today. And making some tough decisions about we regulate for this in future is going to reap huge benefits for Australians in the decades ahead.
The Productivity Commission recently found that a member entering the system today into a MySuper product in the bottom-quartile could retire with more than half a million dollars less than they would have had if they were in a top-quartile product. This is a genuine scandal.
What it means is that if we can get the legal framework right, it’s possible millions of Australians could end up with hundreds of thousands of dollars more in their retirement. That’s big bang for buck.
There are a number of proposals on the table for how we could default more Australians into quantity superannuation funds – from the Fair Work Commission, to best in show, to an expanded role for the Future Fund. We will have more to say about this over the coming months – of course, like you, I am awaiting the outcomes of the Hayne Royal Commission – whose recommendations I do not want to pre-empt.
A lot of the public discussion has been about the default system. But we need to pay equal attention to the millions of Australians who are already in a fund, but that fund is delivering poor returns to the member.
According to the Productivity Commission, in the default market alone, about five million member accounts and $270 billion in assets are in underperforming funds. One of the biggest factors in underperformance is fees. Australians are paying over $30 billion a year in fees – and that’s excluding insurance premiums.
High fees hurt members. They reduce members’ returns, and ultimately members’ retirement incomes. They are the biggest drain on long-term net returns across funds. Even a fee just 0.5 percentage points higher can cost a typical full time worker $100,000 by retirement. The Productivity Commission has also found that “funds that charge higher fees typically do not deliver better net returns over time to members.” Underperforming super funds, high-fee funds with poor returns, are not protecting members’ best interests. Some of these funds are ripping Australians off, essentially pilfering. Again, this is a scandal, and Labor will not tolerate it.
Trustees owe a duty to their members. This is not about industry, retail or corporate funds. It is about members. And if a fund is delivering returns to members consistently in the bottom quartile, something is going wrong, and Labor is going to act to fix it.
Fund performance is what impacts the most Australians. But I also want to make some comments today about misconduct in funds. Again, public trust is crucial to this sector. And there has been some conduct which has shaken that trust.
The Hayne Royal Commission has uncovered appalling, unacceptable misconduct by superannuation funds – conduct which is completely at odds with members’ interests.
These include very disturbing conflicts of interest, trustees unaware of the nature of their legal obligations, charging fees for no service, keeping regulators in the dark and paying compensation to superannuation members using their own retirement savings. This kind of conduct must be stamped out.
And I am eagerly awaiting the Royal Commission’s findings and recommendations about how we can clean up misconduct in the superannuation sector. And as Chris Bowen said just last week, Labor’s default position will be that if the Royal Commission recommends something, unless there is a good reason not to implement it, it should be done.
Universality is another issue that Labor has already announced policy on. Because it is clear that our superannuation system is not working equally for all. We know that super is tending to exacerbate existing inequalities in the workforce.
If you are male, with a steady job and good pay, generally our system works pretty well for you. But if you are a woman, if you take time out from the workforce, if you work part-time, casually or in non-standard employment, the system may not be working so well for you. This is something I want, Labor wants, to address.
We have announced a number of superannuation policies for the election to make superannuation fairer. Last year, I was so proud to stand with Bill Shorten, Tanya Plibersek and Chris Bowen to announce Labor’s policy for women in super.
On average, women currently retire with superannuation balances more than forty percent lower than men. In 2015-16, the superannuation gender gap was over $113,600. This is not fair.
If elected, Labor will introduce a suite of reforms that will work towards closing the super gender gap. These include paying superannuation on Commonwealth Paid Parental Leave and Dad and Partner Pay payments – because nobody should be penalised for taking time out to have children.
If elected, a Shorten Labor Government will also phase out the $450 minimum monthly income threshold for the superannuation guarantee, make it easier for employers to make extra payments into a woman’s superannuation fund and ensure the Government considers the impact that any future changes to super would have on women. I hope we get the opportunity to work with unions, employers and the industry to make the structural changes necessary to start breaking down the super gap.
Australia also has a significant issue with unpaid super. Industry Super Australia statistics recently revealed that in a single year, an incredible 2.98 million Australians experienced some form of non-payment or underpayment of super. These workers were losing out on $5.9 billion in money that they were owed.
What worries me even more is the way that this issue disproportionately affects particular groups. According to ISA, 75 percent of workers affected by unpaid or underpaid superannuation are under 35, earn under $30,000 or are in blue collar jobs. Workers in certain industries are also far more likely to miss out. ISA found almost half of labourers, machinery operators and drivers collectively missed out on more than a staggering $820 million in just one year.
The current system for claiming unpaid super isn’t working. It’s inefficient, it’s opaque, and too often fails to get workers back the super they are owed. I want to give you some examples about the real-life impact of this problem.
One recent example was of a woman who worked a Melbourne café and was paid less than the minimum wage and therefore underpaid superannuation. When she complained, her shifts were cancelled and she was threatened with a lawsuit.
Another is woman who – despite a 20-year career as a chef – only had $3,000 in super. Her last job paid her cash in hand below the minimum wage, with no super.
These stories trouble me greatly.
And, if elected, a Shorten Labor Government will take urgent steps to rectify this problem. This includes placing the right to superannuation within the National Employment Standards, strengthening the ATO compliance regime and increasing penalties for employers for underpayment or non-payment of superannuation.
Labor’s policy will make a big difference. Including superannuation in the NES give the powers to workers and their representatives to get their super back through Fair Work or the courts – regardless of whether they are working under a contract, award or another industrial agreement. It will let workers to pursue claims collectively, it will speed up the processing of super claims, and it will allow workers and representatives to inspect records of super payments – as they can do with wages.
It should not just be up to workers and unions to fix Australia’s unpaid super problem – it’s time for the government to act. That’s why Labor has also committed to strengthening the current ATO process. If elected, Labor, will be pushing the ATO to take a more active, rigorous approach to Superannuation Guarantee compliance. We will require the ATO to publish an annual report on the non-compliance with super – including information on the penalties imposed on employers who breach their SG obligations and a gender breakdown of unpaid super. We will also hold ourselves to account – requiring the relevant Minister report to Parliament each year on progress to address the issue of unpaid superannuation.
Finally, Labor if elected will also crackdown on employers who avoid their SG obligations. We want to see Part 7 civil penalties increased from 75 percent to 100 percent of the amount for employers who underpay because they made a false or misleading statement, and from 200 percent to 300 percent for failing to provide an SGC statement to the ATO when required to do so.
We will also seek to tighten the ATO’s discretion to reduce penalties. Information provided on notice by the ATO showed 80 percent of the 25,000 employers who failed to pay SG on time attracted no penalty at all. This isn’t good enough.
As is probably inevitable in a speech at this particular moment in our conversation about super, I have focused on some of the big issues that we will need to tackle. I want to acknowledge that there are some good things happening in super – funds performing brilliantly, providing high returns at a low cost, and leaving members with a significantly higher standard of living than they otherwise would have had. This is a worthy, significant achievement.
Labor wants the chance to strengthen and improve Australia’s superannuation system. We have a very to real shared interest in tackling this task head-on, and I feel confident that if Labor engages strongly with you on the reforms we propose, you will come with us on this.
Standing up for ordinary Australians is Labor’s mission. And there is a clear reform project here on superannuation that will help more Australians retire with a better quality of life. That’s what we’re all here for, and I very much hope that we have the opportunity to work together towards this goal.
ENDS