Super bills pass Senate

Amendments aimed at industry super funds

By Alex Sampson

The superannuation industry has been given a reprieve to what would have been a A$2.6 billion cut to life insurance fees following a deal between the government and the Greens in Parliament last night.

Two of the government’s superannuation bills passed the Senate after lengthy negotiation, plenty of compromise and extensive amendments, including addressing erosion of low super balances by excessive fees.

The bill will have to return to the House of Representatives before it becomes law.

Fees on accounts with A$6,000 or less will be capped at 3% and exit fees will be abolished from July 1 this year, making consolidation of accounts easier and more appealing.

The Australian Taxation Office will be given more power to return lost and unclaimed super using data-matching technology.

“Although the technology to automatically consolidate accounts has been available for many years without requiring members to do the legwork legislators have dragged the chain,” Industry Super Australia deputy chief executive Matt Linden said.

“Coupled with fee caps for accounts under $6000 these measures will have to do the heavy lifting to prevent erosion of small account balances.”

The government managed to work in a royal commission recommendation to create civil penalties for super trustees and directors who fail to act in the best interests of members.

Additional safeguards to protect young and low balance members from unnecessary insurance were dropped from the final bill, including measures to end default life insurance for people under 25, as well as for low-value or inactive accounts.

The Greens have consistently argued to keep default insurance for under 25s, with Senator Peter Whish-Wilson telling the Senate that “nobody needs insurance until they need it”, arguing a default system protects the most vulnerable, such as young blue-collar workers in construction or policing.

"While there are many problems with the way life insurance is provided through super, the underlying principle of default super, including low-cost group insurance, is good public policy,” Whish-Wilson said in a statement.

While disappointed, Industry Super Australia’s Matt Linden, said regardless, industry super funds would strive to ensure default insurance arrangements remained cost effective and matched to the insurance needs of members taking into account age and other factors such as occupational risk.

“Trustees who fail to operate in the best interest of fund members will now have little place to hide,” Linden said.

ACTU assistant secretary Scott Connolly said the amendments were “significant and positive”, addressing significant flaws in the original legislation.

He said: the 2018 bill “will no longer strip insurance from a huge number of workers and also improves the account consolidation schedule by forcing the ATO to act within 28 days of receiving a transfer”.  

Connolly slammed the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures Number 1) Bill 2017 as a politically motivated attack on industry funds, which “would have put in place a two-tiered enforcement regime in industry funds faced much harsher penalties than bank-owned funds”.

“It is unfortunate that the Morrison Government did not take the opportunity presented by these bills to enact the recommendations of the banking royal commission that would apply harsh penalties for misconduct by banks and bank-owned funds,” Connolly said.

The Australian Institute of Superannuation Trustees welcomed the passage of the Protecting Your Super package, noting that important amendments would protect members from unintended consequences of the new legislation.

AIST chief executive Eva Scheerlinck said AIST also supported extending the definition of active to include making changes to an account’s investment options, insurance cover and binding nominations.

“These are common sense amendments that will ensure that workers who have a good reason for being ‘inactive’ are able to remain in their fund,” Scheerlinck said.

Scheerlinck said the ban on exit fees was also a welcome measure that would further encourage members who are in poor performing funds to make the switch into better superannuation products.

“There are plenty of people in long-term poor performing funds who would benefit from switching out of their fund. The ban on exit fees will ensure they aren’t penalised by doing so,” Scheerlinck said.