By Joseph Mitchell
ACTU Workers Capital Lead
On Thursday, the Morrison Government partnered with One Nation and Centre Alliance to pass a significantly flawed piece of legislation – the Your Future, Your Super Bill. This Bill is a concerted attempt at ensuring that for-profit superannuation funds have systemic advantage over the better-performing, all-profit-to-members industry super funds.
The Bill will change the operation of default funds, introduce performance benchmarking for some funds, and significantly change the regulations that not-for-profit superannuation funds have to comply with.
Currently as you change jobs or careers, if you don’t elect otherwise, you will join the workplace default fund. For most workers, this means joining your industry-appropriate default-fund – construction workers in Cbus, retail workers in Rest, transport workers in TWUSUPER, cleaners in AustralianSuper, and so on. It means you have a fund which understands your workplace, your preferences and can tailor products and services which suit you – and because most workers join their industry fund, their super is invested in a high-performing fund.
The law as passed will upend that. From 1 November, every worker who currently has a superannuation fund will be ‘stapled’ to that fund. Rather than your super going with you, you will be tied to your first fund unless you make otherwise make a choice.
While the intention of this measure is to prevent the creation of multiple superannuation accounts, the effect could be devastating for millions of Australians. For the roughly 3 million people who are currently in under-performing funds, it could mean being up to $500,000 worse off by retirement.
Not only will workers stand to lose hundreds of thousands in retirement savings stapled to under-performing funds, but many will never be told they are in an underperforming fund because the Government has excluded some funds from performance benchmarking.
While the introduction of performance benchmarks for superannuation funds is welcome, the Government has arbitrarily excluded $500bn of assets under management from performance benchmarking. These are some of the worst performing funds which were criticised by the Royal Commission for excessive fees. The Government excluded these funds from benchmarking because they are largely for-profit bank-owned funds. Workers will be stapled to their underperforming fund for life, and never know it was underperforming.
Being stapled to your first fund may also strip many of much needed insurance. For workers in high-risk industries, insurance is often unaffordable or unavailable outside of super. This is because funds like Cbus purchase group insurance without occupational exclusions that some other funds may have. Workers in high-risk industries will be left without insurance they would otherwise have access to if they joined their default fund.
According to ACTU President Michele O’Neil, it is clear who the real beneficiaries of these changes are stating, “This bill will leave millions of people with a less secure retirement.
“Workers will be worse off, stuck in superannuation funds owned by big banks, with big fees and big profits to shareholders.
“It will only benefit the consistently under-performing for-profit and bank owned funds.”
The Government has also made changes to the regulations governing superannuation funds – in a way which makes your industry super fund less efficient without affecting for-profit funds. It has introduced a reverse-onus-of-proof on all expenses made by a fund, meaning the fund has to generate a business case for any purchase – even a stapler – to ensure they are complying with the law. They’re calling this the best financial interests duty, and funds are assumed in law to be breaking the law unless they can prove otherwise.
But the kicker in this is that for-profit funds are essentially exempt from this duty. The Government has written the law in a way such that profits paid by funds owned by Commonwealth Bank, ANZ, NAB and Westpac to the banks are deemed in members’ financial interests.
This egregious change will mean that banks can reap profits from members and run ads and marketing campaigns which would otherwise fail the best financial interests duty. This will give for-profit funds a systemic advantage over industry super funds in the competition for new members, something the Government has been trying to achieve since Howard.
In some good news, the Government was forced to make some significant concessions to the original Bill. In its first draft, the law would have given the Treasurer the power to cancel any investment made by a superannuation fund – including those which are in members’ best financial interests. Due to the advocacy of thousands of union members we were able to remove that provision and secure the support of some crossbenchers.
Overall, these laws will make super worse for members. For those in industry funds, administration fees may be required to increase to compensate for all the new regulations and laws that have been lumped on them. Those in underperforming funds may never get out. The big winners out of this law change are the banks and we will need to work harder to ensure they don’t consolidate their victory.