After five years of Budget superannuation tinkering, the latest Budget changes have confronted superannuation funds with another series of administrative and regulatory challenges.
The devil will lurk in the implementation detail and there is substantial scope for unintended consequences
For a Government which came to power in 2013 with the promise of no negative superannuation tinkering, the Coalition proved on Budget night 2018 that super tinkering had become an annual event.
What is more, the superannuation changes announced in the 2018/19 Federal Budget are sufficiently open-ended as to guarantee superannuation funds and their administrators a costly implementation head-ache likely to last well beyond the next Federal Election.
At first blush, the move to make insurance inside superannuation for those aged 25 or younger ‘opt-in’ rather than ‘opt-out’ made perfect sense, particularly given the abundant evidence presented to the Parliamentary Joint Committee on Corporations and Financial services and the Productivity Commission on the manner in which premiums were eroding already low balances.
And the superannuation industry can be certain that when the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry gets around to dealing with insurance and then superannuation, it will traverse just how badly some people have been served by the existing ‘opt-out’ arrangements with respect to insurance inside superannuation.
However, as with all such changes, the devil will lurk in the implementation detail and there is substantial scope for unintended consequences, not to mention significant additional costs being imposed on superannuation funds and insurers as they seek to implement what must necessarily be an age-based two-step process.
In reality, there is a very real prospect of highly mobile 25 to 30 year olds falling through the cracks as they change jobs and change superannuation funds. Any examination of the issues dealt with by the Superannuation Complaints Tribunal (SCT) ought to have informed Treasury officials of the prolonged shelf-life of insurance-related superannuation disputes with decisions made up to 30 years’ ago playing out today.
What is more, there is the reality that many young people starting their first job and joining their first superannuation fund will have little idea about what they might actually be missing out on in the context of being hit by a workplace injury.
On the available electoral evidence, the superannuation changes announced in the 2018 Budget represent the last likely to be implemented by a Coalition Government before the Australian Labor Party assumes the Treasury benches and begins implementing its own superannuation agenda.
Thus, some key questions need to be asked: Can the Coalition navigate its Budget changes through both houses of Parliament before it formally enters election mode? Will a future Labor Government leave the Coalition’s policy approach, including the Australian Financial Complaints Authority (AFCA), intact?
While much attention was directed towards the announcements such as insurance ‘opt-in’ and the banning of superannuation exit fees, closer examination of the Budget papers served to reveal other Government expenditures intended to underpin the myriad changes to financial services, not least the arguably highly untidy transition process from the Superannuation Complaints Tribunal (SCT) to AFCA.
Those are exercises which will end up being funded by the industry and therefore superannuation fund members under a combination of the so-called “APRA levy” and the user-pays model being implemented for the financial services regulators.
On the upside, the Government steered clear of suggestions that it would alter or delay the timetable for increasing the superannuation guarantee to 12 per cent and it opted not to change the concessional contribution caps.
The challenge for superannuation funds now will be measuring their pace of implementation against the likelihood and timing of a change of government.