The federal government has released draft legislation, that when passed, will give Australians more power over their superannuation providers, including making it easier for consumers to opt out of automatic life and disability insurance policies provided through superannuation.
Announcing this yesterday, the Minister for Revenue and Financial Services, Ms Kelly O’Dwyer, said that the proposed changes to superannuation legislation would strengthen the prudential framework to deliver a more transparent and accountable compulsory retirement savings system.
Commenting on the life insurance opt-out measure for superannuation members, she said: "The reason this is important is because so much of their retirement income can be eroded through fees and charges."
Earlier this year, a report from the Insurance in Superannuation Working Group, chaired by industry veteran Jim Minto, found that super balances were being eroded by unnecessary life insurance.
The package of proposed changes also includes measures that:
- Make superannuation providers more accountable to consumers through the introduction of annual member meetings. This is already a longstanding requirement for the public companies in which superannuation funds invest their members’ money.
- Require funds to report and publish annually more transparent information on how their fund is being managed, including information on how the fund sets its fees and the way it spends members’ money.
- Strengthen default MySuper products including a stronger annual assessment of MySuper product outcomes to ensure the investment and insurance strategies, fees, scale and returns are promoting the financial interests of MySuper members. MySuper is a government superannuation initiative to provide low-cost and simple super products for employers to choose as their default super fund.
- Close a legal loophole that has been used by unscrupulous employers to short-change employees who choose to make salary sacrifice contributions into their superannuation accounts.
- Give APRA more capacity to take preventive and corrective action if it has prudential concerns about a fund or if a fund is not acting in the best interests of members.
- Give APRA greater capacity to refuse or cancel a MySuper authorisation where it believes a licensee will fail to meet its obligations.
- Provide stronger protection for consumers by requiring APRA approval before transferring ownership or control of a licensee to operate a fund.
- Make directors of superannuation funds who breach their duties to members subject to the same civil and criminal penalties as directors of ordinary managed investment schemes.
Many of the measures in the package have been recommended by past reviews into superannuation. Feedback on the Bill released yesterday will close on 11 August 2017.
The government had also tasked the Productivity Commission to undertake a review of the superannuation system last year. Ms O’Dwyer said: “The government will consider if any further changes to improve the superannuation system are required in light of any recommendations made by the Productivity Commission.”
The proposed legislative changes are the first overhaul of laws governing superannuation funds since compulsory super was introduced in 1993.