What should a new Government deliver?

With a change in government likely at the next election, a Super Review roundtable considered what – if anything – a Coalition Government should deliver for superannuation.

Mike Taylor, managing editor, Super Review: Russell Mason, in the likelihood that there’ll be a change of government at the next election or that’s what the polls seem to be suggesting, what would you like an incoming Coalition Government to deliver if it were to deliver anything on superannuation?

Russell Mason, partner, Deloitte: Well certainly, don’t make change for change sake, and I think the comment has been made, people want some sort of certainty and surety.

I certainly would like the contribution cap limit to be addressed and I appreciate that the Government will say, well, that will affect the deficit and there’s fiscal implications of that.

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I expect the Government’s first concern would be looking at the deficit and how they can reduce that, so they won’t be keen on increased spending.

But I think they need to have a look at what they can do to encourage people to contribute to super.

I think Dick is absolutely correct in that one of the largest impediments has been the incredibly poor and negative investment returns that the global markets have returned, and not surprisingly.

Why would you put money into an investment that’s going backwards; you put $10,000 in today and it’s worth $9,000 tomorrow and hopefully as investment markets turn around and this financial year favours reasonable returns, that will be a big incentive for people to sacrifice.

And yes, I would like this Government, or the Coalition if it wins Government, to have a look at super and see what they can do without dramatic changes that gives people confidence in the system; that as a 40 or 50-year-old you can look forward to saving for retirement with some degree of certainty that the rules aren’t going to change every five minutes. So stability is what I’d be saying to the Coalition.

Mike Taylor, Super Review: Gordon Noble?

Gordon Noble, policy director, Association of Superannuation Funds of Australia (ASFA): Look, I think if a Coalition Government was to be elected, and not I’m assuming in a Minority Government position, the Parliament would return in some ways to the way it has been in the last one hundred years, which is that the House of Representatives is the majority Government and the Senate is the house of review.

I think ASFA [the Association of Superannuation Funds of Australia] would want to see firstly the conversation and the consultation around superannuation to be a considered debate.

So if there are to be Parliamentary committees they’re not over in a week but actually allow proper industry consultation so that you actually flesh out any changes and what they may mean.

We’d like to see a discussion around the design of the system and the post-retirement side.

So it’s not something that you’d want a piece of legislation put on and then have to debate that in the Parliament in the next week.

You’d want to have not a new Cooper Review; you don’t want to go down pathways of more reviews but you’d want to have a discussion with a new Government about the whole post-retirement plan scape, so that’s certainly one area we would go.

I think the third point would be there’s a conversation here around investments too, but it’s actually significant around the volatility aspect too. But the Coalition are indicating they’ll have a financial system enquiry and that that will include superannuation.

Now there’s a bit of uncertainty as to what they’re thinking is around that and what particularly they’re looking for in terms of superannuation.

So in the early days of a Government we like to really have that conversation with them so that again the financial system enquiry is conducted with consultation, with consideration rather than seeking to make a quick decision.

Mike Taylor, Super Review: Andrew Bragg?

Andrew Bragg, policy director, Financial Services Council: I think like any public policy organisation our agenda for policy change would be the same for either side of politics.

Certainly in terms of the system we think there ought to be some changes to the default fund arrangements. That would probably be at the top of our list.

We’ve always had the view that if you introduce reform like My Super then any complying product ought to be an eligible default fund.

Secondly we would like the Coalition to have a look at the caps, again post-retirement as Gordon said, rather than repeat. We’d be in agreement with that.

To look whether there’s a capacity for the financial system enquiry which is being called the son of Wallace of granddaughter of Campbell, in order to give some appropriate balance. We don’t see that as a threat, probably more of an opportunity at a broader financial services system level.

There is a lot of regulation which is coming out of Europe which is designed to address some of the yields over there.

This may be a vehicle to repel some bad regulation but also to continue the Government’s agenda through the Johnson review of advancing our prospects as a regional financial hub.

Russell Mason, Deloitte: I think Mike whatever we do with any changes going forward, let’s make sure that it adds real value to the end consumer, the member.

I look at MySuper and while it may have started off with the best of intentions I would argue it’s added no value whatsoever to the membership. Ninety-nine per cent of funds have simply changed at the end of the day their default option to the MySuper option.

We haven’t seen any great change but we’ve seen untold millions and millions of dollars of ultimately members’ money spent doing changes to comply with MySuper and I really question the value.

If you see it, it’s about giving APRA [the Australian Prudential Regulation Authority] more powers to stop those that break the rules. I’m all for that, I don’t have a problem with that in the least.

If you tell me it puts more money in members’ pockets, that’s good but I do question some of the changes we’ve seen and the amount of money in compliance that funds have spent back office to meet with it.

Where’s the value for members? Where are members going to see MySuper and many of these other changes enhance their retirement?

As Paul said earlier, it’s about allowing members to have a proper and adequate benefit in retirement.

So when we make changes going forward let’s just step back, as we would with any of our businesses or organisations we’re involved in, and say “where’s the benefit for the end user, if there isn’t let’s not go down that path”.

If it’s better governance, if it minimises fraud, if it minimises the ability of the shonks to penetrate this industry then that’s great – but let’s change take a breath before we dive in with high and mighty changes that add no value.

Mike Taylor, Super Review: Paul Cahill, what’s your point?

Paul Cahill, chief executive, Club Plus: Well MySuper’s been a wonderful exercise for us in that we were one of the lowest cost funds in the country before it started and all it’s done is add costs to us. I think we were in one of the surveys around second or third, so for us we haven’t changed our basic default product one bit.

It’s added the incremental costs Russell alluded to. I’ve just about burnt out two compliance people in getting ready for it.

We’ve spent, I’ve got the numbers but I’m almost scared to say it, quite a deal of money on getting ready for a MySuper world post-1 July, and if you boil it down to the purest form, to our members the net benefit has been additional cost.

They haven’t got a different product. There’s probably a stronger compliance regime around it but at the absolute raw coalface, and we might be a unique fund in that situation, we probably are, all we’ve done is manage to raise our costs.

Andrew Bragg, Financial Services Council: I mean it’s interesting, I think it depends, the level of change depends on the entity.

I mean a lot of not-for-profits as I understand it are able to rebadge, so it may be closer to business as usual for them. But for some of the for-profit super funds they’re looking at massive rationalisation of products.

I mean some of them have got 30, 40, 50 different default bespoke options for different Australian workplaces.

They’ve got to go to one, so that’s a substantive change I would have thought, combined with all the transparency, the fee rules and the higher trustee duties. I would certainly hope that there is going to be some benefit of those changes. 

Mike Taylor, Super Review: Alex?

Alex Hutchison, chief executive, EIS Super: It increased costs, I agree with the other comments that have been made. It forces you to look at your business model and make decisions accordingly.