The historic Your Future, Your Super amendment Bill passed the parliament on Thursday with its so-called ‘stapling’ proposal generating the loudest rebuttal from cross benchers and the opposition party during its passage.
Australian Labor Party MP Stephen Jones (inset) and independent MP Craig Kelly focused on the possibility that stapling could result in workers being lumped with ill-fitting insurance arrangements before the Bill amendment ultimately passed with a vote of 71 to 67.
Katter’s Australian Party and the Centre Alliance voted in favour of the Bill amendment while Independent and Australian Greens voted in line with Labor against the amendment.
Contained in the final Your Future, Your Super amendment Bill was the controversial stapling measure, which will now commence on November 1 this year. Along with the stapling proposal the Bill amendment included the annual performance test, which will result in members being notified by October this year if their fund is failing. It also contained new reporting standards for best financial interest obligations required in advance of annual members’ meetings and through portfolio holdings disclosures as well as the introduction of new YourSuper comparison tool starting on July 1 this year.
In addition to the previously agreed measures the Bill passed today also extends the bring‑forward arrangements to people aged 65 and 66 for non-concessional contributions made on or after 1 July 2020, removes the excess concessional contributions charge which currently applies to contributions in excess of the concessional contributions cap, in addition to a measure to support members wanting to make additional contributions to make up for amounts withdrawn in the early release scheme.
During his speech to the House of Representatives in question time on Thursday before the Bill successfully passed, Treasurer Josh Frydenberg (main picture) singled out funds managers and the “big unions” for inefficiency in the superannuation system which the reforms were designed to address.
“Australians pay more than $30 billion a year in superannuation fees and charges. That is more than they pay for their household and electricity bills and our focus is about driving a better deal,” Frydenberg said.
“We understand that superannuation belongs to the Australian people. It doesn’t belong to the fund managers and it doesn’t belong to the big unions,” he said.
Since its surprise introduction in the Federal Budget in October last year the Your Future, Your Super amendments have been the focus of the superannuation industry lobbying and discussions with policy makers, which in recent weeks led to the inclusion of administration fees charged by super funds in their new annual performance tests as well as the introduction of performance benchmarks covering listed and unlisted property and infrastructure.
The amendment Bill that passed on Thursday was a reasonable albeit not perfect outcome for policy makers and the superannuation industry in the progress for better member outcomes, David Bell, executive director of the Conexus Institute said.
“Stapling is necessary to prevent the generation of multiple accounts,” Bell told Investment Magazine.
“Both models have benefits and detractions and our research suggests no clear best model. This is a quite reasonable solution, and it is just an unfortunate side effect that there will be winners and losers amongst super funds,” he said.
When it comes to the performance test Bell noted the Conexus Institute had held the research-based view that the performance test is flawed in many ways but he added that, post the changes to benchmarks, the impact on how funds manage their assets in the future will be manageable.
“Industry will adjust to the point where test fails become few and far between,” he said.
“The ‘past sins’ nature of the test undoubtedly means that many funds who have made a lot of adjustments to their investment strategy will experience rough justice,” he predicted.