Forget the argument over the resource tax, the debate over company tax cuts and the higher superannuation contributions, the most important policy change from the current Labour Government in Canberra could be what it does with the recommendation of the so-called Cooper Review, which examined Australia’s system of providing superannuation and found it wanting.
On the face of it we won’t see any changes until after the election, so if the ALP wins, the reforms will remain. If it loses, the Opposition will in all probability oppose it, seeing how they don’t like some of the suggested changes on commissions and fees and conflicts of interest.
And yet, as we have seen with the Storm scandal and the Trio Funds abuse of super monies, change is needed and needed quickly.
Big companies like the Commonwealth Bank do not have a good reputation and the likes of the National Australia Bank (through its MLC arm) and the AMP, have been pinged by regulators in the past few years for misselling and other problems, and had to pay tens of millions of dollars in compensation.
Predictably, some industry groups have criticised the review and its recommendations, but seems to have ignored the problems like Storm, the lack of transparency on costs and the inability of many companies to give good service to members and clients.
The super business is big: total assets are more than $1.3 trillion and are projected to grow strongly in coming years and that honey pot naturally attracts all kinds, from the reputable to the dodgy.
The federal government commissioned the Cooper Review in 2009 to provide it with recommendations on how to make superannuation simpler, safer and more efficient.
The full review was released yesterday and is here.
Some of the details have already been revealed, such as simplified portable super polices.
That’s known as MySuper, a superannuation product that will suit those workers who want someone else to take care of their superannuation choices for them.
The option is designed to be a simple and cost-effective product with a single, diversified portfolio of investments to suit the 80% of superannuation fund members who have the default option in their current fund.
And the other major part was a recommendation that called for the creation of SuperStream, described as "a package of measures to improve the processing of superannuation transactions, by better using tax file numbers and technology, and creating uniform data standards".
The report says manual processing of superannuation money and data transactions leads to excessive costs.
It proposes giving the Australian Taxation Office sole responsibility for the new standardised, electronic transmission of transactions.
The superannuation reforms are said to complement steps the government has already announced on financial advice and the proposed boost of contributions to 12% for 8.4 million workers.
But that will only happen if the new resources profits tax happens.
If it doesn’t then it’s back to square one.
The Federal Opposition has also expressed opposition to the moves to improve transparency in financial advice and end commissions.
Some sections of the industry have opposed MySuper (mainly the fund managers) who claim (wrongly) that it will remove the ability of policyholders to choose.
The simple fact is since choice was introduced into super a few years ago, the number of people choosing to move away from their existing employer or industry based funds or options, has been very small.
In a statement yesterday the federal government said it "welcomes the MySuper and Superstream initiatives which could lower fees by 40 per cent, lifting the retirement savings of a worker on average wages by $40,000.
"We also have to make it easier to do simple things like consolidate multiple accounts, compare different funds and pay superannuation for your employees," Mr Bowen said.
"The Cooper Review is the third stage of the most significant reforms to superannuation since national superannuation was introduced.
"The three stages of reforms to superannuation are:
- The Future of Financial Advice reform package which applies to financial advice generally, including advice relating to superannuation products;
- The Government’s Stronger & Fairer Superannuation reforms, including an increase in the Super Guarantee to 12 per cent boosting the retirement incomes of 8.4 million Australians; and
- The Government’s response to the Cooper Review.
"A considerable amount of consultation went into the preparation of the report, as demonstrated by over 450 formal submissions. The Government will now consider the final recommendations of the report before providing its response and looks forward to consulting the industry on the key proposals," Financial Services Minister Bowen said in a statement.
