Labor will not overhaul a “tsunami” of regulatory reforms to the superannuation and financial advice industries since the Hayne Royal Commission if it wins Government this year, according to opposition spokesperson for financial services and superannuation, Stephen Jones.
Jones said he welcomed 60 to 80 per cent of reforms made by the Coalition to improve super members interests in the past five years and sees a Labor government maintaining these changes.
“Should we win government in May, the way we would regulate the sector, stability and certainty are absolutely critical,’’ he told a Conexus Financial webcast (see below) alongside financial services and superannuation minister Jane Hume and industry heavyweights.
“The industry has got to be able to digest stuff that is already in play which is why we are not looking at a massive overhaul of any of the changes that have been put in place,” he said.
“In fact I would call it more maintenance than architecture is what is needed.’’
However the Retirement Income Covenant, which takes effect on July 1 to compel trustees to have retirement income strategies for members, will fail unless the industry can get the “advice piece right”, Jones said.
“The thing that is glaringly obvious to me is that Australians won’t invest in products that they’re either uncomfortable or unfamiliar with, that are out of their comfort zone unless they are advised to by an adviser for an institution that they trust and is operating 100 per cent in their own best interest, that of the customers.
“It’s an area that needs to be fixed.”
Fundamentals of reform are good
Meanwhile Senator Hume said she has a good working relationship with Jones and agreed on the fundamentals of the reform process.
“We’re not having sleepovers and braiding each other’s hair just yet but one of the things we do agree on is that Super is here to stay,’’ Hume said.
“It has been one of the most partisan and divisive areas… to my great frustration. While both sides of politics look for a political mallet to throw at one another, this is not one that should be there.”
She said the Your Future Your Super changes were part of the essential services package alongside Medicare and the NDIS (National Disability Insurance Scheme).
“Superannuation is part of the fabric of the Australian economy and government has a responsibility to make sure its sustainable into the future,’’ she said.
No concern about super fund merger activity
The Morrison Government was “still very keen” to remove regulatory obstacles for smaller super funds to merge, Hume said.
She said she had received good feedback from AustralianSuper, Tasplan and others on how to remove “the grit from the wheels of the merger process’’.
“One of the problems is that each merger is different and it’s sometimes not that easy but we’re still very keen to see that happen,’’ Hume said.
More than 15 mergers and alliances in the super sector were announced in 2021 including Australian Prudential and Regulatory Authority (APRA’s) order for Christian Super to merge with a “larger, better performing fund” after it failed to meet its inaugural superannuation performance test.
Hume answered a question from Aware Super chairman Neil Cochrane, whose fund has been one of the most active merger partners in the sector this year.
Aware Super, formerly First State Super, is Australia’s second largest fund with $130 billion funds under management after merging with VicSuper in 2020 and with smaller funds VISSF and WA Super in the past 18 months.
Hume said she had spoken to APRA about ways to make the process smoother and less costly for smaller super funds and she was unconcerned about merger activity and concentration in the sector .
“Some of the concerns are that there’s going to be so many mergers we might end up with [something like the] banking sector,’’ she said.
“That’s a far more concentrated industry but we still have over 70 MySuper products out there. I don’t think there’s a chance of that happening any time soon.”
“Talk to me when we’re down to 20 and maybe that’s something we might consider”.