AUSTRALIA - The superannuation industry has broadly welcomed the final details of the government's Stronger Super reforms, which it claims could result in a rise in member savings equivalent to a 1% increase in contributions.
In a long-awaited announcement, assistant Treasurer and minister for Financial Services And Superannuation Bill Shorten today outlined the key elements to Stronger Super, including the creation of MySuper, a default, low -cost superannuation product to launch on 1 July 2013. Super funds would have four years - until 1 July 2017 - to transfer the existing default balances of members to a MySuper product.
The legislation will also provide the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC) and the Australian Taxation Office (ATO) with increased powers to improve oversight of the superannuation industry and would improve the administration and management of super accounts through SuperStream reforms.
In the details released today, MySuper will have a single, diversified investment strategy and will have to be offered at a standard set of fees, although super funds can offer discounted administration fees to employees of particular employers. Any discounted fee will be reported to APRA and published by the fund. MySuper public offer funds will be able to be compared on fees.
Meanwhile, under the SuperStream proposals, the government has established a working group that will create data and e-commerce standards to move all employers to electronic payments of contributions. The proposed contributions and rollover data standards are expected to be available in early 2012, and the data and e-commerce standards will be mandated for superannuation funds from 1 July 2013. The government will extend the data and e-commerce standards to large and medium sized employers from 1 July 2014.
"I think the government has come out with some direction which is much better than where we were reading before," said David Knox, a senior partner at Mercer. "It is more flexible and it will drive more competition in the industry. ... Larger employers can now design insurance and retirement packages that suit their workforce. If you have a large blue collar workforce, it's quite different than a large white collar workforce. Employers can participate in shaping better outcomes for their employees."
Knox also noted that the extended transition period to MySuper provided more flexibility for contractual agreements.
"This removes most of the legal or contractual issue that might have been in place previously because people are in contracts for superannuation products," Knox added. "I think the outcome is good there. We notice that as of October 2013, employers must make contributions to a fund that offers a MySuper product, but it doesn't necessarily mean that contributions have to go into a MySuper account. That flexibility means that a member that is in a default fund for the moment can stay in that default fund and doesn't create new accounts."
Pauline Vamos, CEO of the Association of Superannuation Funds of Australia (ASFA) added: "The advent of MySuper and increased 'back-of-house' efficiencies, through SuperStream will deliver better retirement outcomes for most Australians.
"The reforms will mean the industry can better cope with the growing trend of people changing jobs on a regular basis. They also mean we can respond to the growing desire of people to tailor their superannuation and insurance to their individual needs."
Shorten said the draft legislation for MySuper would be released "in the next few weeks".
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