House Passes MySuper Bill
On August 22, the House of Representatives passed the MySuper legislation, the bill intended to deliver a new default superannuation product with lower costs and less complexity.
In announcing the bill’s passage, Bill Shorten, Minister for Financial Services and Superannuation, said that he expects the new scheme to reduce fees and to enhance retirement options. "It reflects the Gillard Government's commitment to improving the efficiency, competition, transparency and governance arrangements for the superannuation industry," he said.
Beginning in July 2013, the new framework will replace existing default options for superannuation investments. Products will have a set of features in common so that the performance of different offerings can be compared more easily.
According to Shorten, the Government introduced two amendments to the legislation, a move made in response to the concerns of stakeholders.
First, the date on which employers must begin to make mandatory contributions has been deferred from 1 October 2013 to 1 January 2014. “This additional three months will facilitate a smoother transition to the new regime for both employers and superannuation funds,” Shorten said.
Second, funds offering a “life-cycle investment strategy” can ask permission to charge up to four different investment fees. The original bill allowed the imposition of only one such fee. According to Shorten’s announcement, “This change will avoid cross-subsidisation between members in different stages of the lifecycle strategy.”
Shorten indicated that the Government would move the remaining MySuper provisions forward as soon as possible, but did not provide a specific timetable.
In addition to the two Government amendments, Greens Deputy Leader Adam Bandt offered an amendment designed to prevent “flipping,” the practice of moving a worker’s money into another, more expensive fund after a worker has left the workplace. Previously, this could be done without the worker’s consent.
In making a case for the amendment, Bandt called attention to a study by the Industry Super Network that found that 12 out of 13 large retail funds had engaged in some form of flipping. According to Bandt, the practice resulted in an additional cost of $300 per member each year, an annual increase of 30% over fees that would otherwise have been charged.
"By 'flipping' funds between products without permission, fees could have increased by up to 73%, so we needed to protect workers from this sort of gouging," Bandt said.