October 13, 2020 
36 Comments 
Labor says it will block the superannuation changes announced in last week’s Federal Budget unless a “massive design fault” built into the system is fixed.
In a speech to the Australian Institute of Superannuation Trustees (AIST), Labor’s shadow assistant treasurer, Stephen Jones, explained that the changes that were meant to improve the transparency of super funds “only measured half of the fees” employees are actually charged.
Mr Jones said Labor was committed to addressing the huge gap between the highest and lowest performing superannuation funds, costing the average worker as much as $600,000 in lost retirement savings. However, Mr Jones said once the detail of the government policy had been analysed it did not properly measure the fees charged by the relevant super funds.
“The productivity commission has found that the fees and charges can be costing an average worker as much as $100,000 a year in retirement savings,” Mr Jones said. “When the government announced in the budget papers that it was going to address these issues, Labor met it with some enthusiasm.
“We wanted to ensure that there was no safe harbour for an underperforming fund. We’re on board for that project.
“Unfortunately, as with so many things with this government, there is a huge gap between the promise and the follow-up.”
The government’s budget announcement last week included the provision for the tax office to develop a tool to compare and select a super fund from the MySuper shortlist.
From July 2021, the Australian Prudential Regulation Authority will conduct tests of the funds on the shortlist to find the ones that underperform for two consecutive years and block them from receiving new members until they improved.
However, Mr Jones said the government’s proposals only measured investment fees and did not measure administration fees, which was meant they were flawed.
“This is a massive design fault which runs the risk of enabling funds to divert costs and charges from one line item to another without addressing the underlying problem of high fees,” Mr Jones said.
“In other words, members can and most likely will still lose out from oversized fees.
“They will have to fix this glaring anomaly.
“The productivity commission has found that the gap between a high and a low-charging fund on administration fees can be as much as $100,000 lost in retirement savings.
“That’s a massive amount, and yet the government is saying it’s going to ignore that part of the fee structure.
“On the face of it, this looks like a monumental stuff-up. The government said that they are for performance, but they are ignoring half the fees that are charged within the industry.”
One of the other superannuation proposals outlined in the Budget included allowing superannuation funds to follow members around when they changed jobs.
Mr Jones said Labor supported the idea of getting rid of multiple accounts but would need to see the detail to ensure workers were not “stapled to a dud fund”.
“If the government decides to staple workers to a dud fund, they are sentencing that worker to poverty in retirement,” Mr Jones said.
AIST chief executive Eva Scheerlinck also said that the industry would need to see more details about how individuals would be stapled to a super fund for life.
“We need to ensure that people are not in danger of being mis-sold or stapled to an underperforming fund outside the default system,” Ms Scheerlinck said.
“In particular, we are concerned that the scheme does nothing to protect people who are already in dud funds.”
Ms Scheerlinck also said there were concerns about how the insurance policies would work if superannuation funds followed workers who changed industries throughout their career.
“For instance, someone whose first out-of-school-job is working in call centre who then goes on to work in the mining industry may be stapled to a fund where they don’t qualify for insurance protection,” Ms Scheerlinck said.
The AIST also called on the government to abolish the $450 monthly income threshold and consider a one-off contribution to super accounts of low-income earners who accessed their super early.
What do you think of the government’s proposed superannuation changes? Should any measurement tool take all fees and charges into consideration?
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“The productivity commission has found that the fees and charges can be costing an average worker as much as $100,000 a year in retirement savings,” Mr Jones said. NO THEY DIDN”T, no wonder Labor is in Opposition. When you read on you find :
“The productivity commission has found that the gap between a high and a low-charging fund on administration fees can be as much as $100,000 lost in retirement savings.
Yes, MB. I read that sentence and thought, “How on earth could the ‘average’ worker contribute enough to super to be paying $100,000 a year in fees? Then I saw the contradictory sentence much later, and it made more sense. Labor needs to stop making blunders like this. How can we have confidence that they did, in fact, identify a mistake in the proposed legislation when they make stupid statements about it that are clearly wrong? Makes me wonder if they misread the entire proposal.
Just a drop in the ocean mistake compared to Joshie Fraudenberg $60 Billion overestimate for Jobkeeper.
Just a drop in the ocean mistake compared to Joshie Fraudenberg $60 Billion overestimate for Jobkeeper.
Spot on MB – you beat me to it.
Evidence (were it needed) of the calibre of modern journalism – even when corrected it doesn’t say much for the various parties involved.
I don’t think Jones did say that. He has been misquoted by the reporter.
Ok Rod63, if what you say is true, how can we believe anything posted by reporters?
I did not find a copy of the speech however if you read the transcript of his door stop you will see he likely fluffed his lines, but yep, not good excuse. Fortunately there are few in that place who have not done similarly from time to time.
https://www.stephenjones.org.au/media-centre/transcripts-opinions/transcript-doorstop-interview-parliament-house-canberra-monday-12-october-2020/
Most Australians currently living on their super are simply living on their own money while others receive a higher rate taken out the the money that the former group paid in tax while many of the the latter group didn’t pay in at all.
Surely the next cohort are not going to voluntarily land themselves in that position. They will retire earlier on their own money and aim at entering official retirement (even at the elevated age) on a full age pension topped up with their limited super – the only way to get any value out of it.
If that doesn’t change before long Keating’s aim of having personal super reduce the cost to government of paying age pensions, will not be fulfilled.
I agree. The changes have made it quite silly to take annuities or income streams and so a full aged pension and maximum savings for that is the correct option. Otherwise you simply go without all your life for no reward at all.
adbob – that is the way I did it, only way to get a health care card (pension card with the discounts). Financial advisers at the time suggested exactly that. Give everyone the age pension card over 65 and things like that would not happen.
Keating envisaged super as a supplement to the aged pension, not as a substitute for it.
“Such a scheme would maintain the age and service pensions as the foundation of equity and adequacy in retirement income arrangements, but be complemented by the income of private superannuation with the dual systems integrated through to tax and social security systems,”.
Farside – that is the system in place in my country of birth. Age pension stays, super added, other income counted and the lot taxed as usual. However, there are no concession cards, rental assistance payments and free hospital treatments. That system encourages work, thrift, responsibility whereas ours is rewarding mediocrity. The less you create during life’s work the more you get in old age.
Your country of birth got it right, Mariner. Australia got it very, very wrong. And they now can’t afford to fix the pension system, nor to increase the pension, because all the money that should be funding retirement is going in superannuation tax concessions to the wealthy. They talk all the time about the high cost of supporting aged pensioners, but stay quite silent about the rapidly increasing billions going into the super funds of the highest income earners. The top 20% are costing the nation more than the entire retired population.
Youngagain, able to provide calculations or got a link to support the top 20% are costing the nation more than the entire retired population?
“What do you think of the government’s proposed superannuation changes? Should any measurement tool take all fees and charges into consideration?”
It’s a good start but more needs to be done. It’s alright to say that non-performing super funds will not be allowed to take on new members unless their problems are fixed but those members in such funds need protection. If a super fund loses money in 2 consecutive years it should be forced to amalgamate with a fund that is performing much better. As regards fees, it’s about time that a limit be placed on fees and all fees should be included. Insurance attached to an account should have the default position as opt in rather than the current opt out. All funds should have standard rules which will allow members to retain the fund of choice if changing employer. Nobody should be forced to join a fund just because they change jobs.
Keating’s introduction of compulsory super was probably the most important change to worker’s pay structure in decades. As with all new legislation where new ground is broken there will be loopholes and problems so it’s only fair that adjustments should be made. What is not needed is for any government to tighten the funds up so much as to stop members having a choice of funds.
Perhaps the ideal position would be for the ATO to hold all compulsory super with a board and employees specifically designated within the ATO to administer the fund. This would remove all of the different boards and employees currently administering the multitude of funds currently in existence, reduce the running costs which includes salaries, bonuses, donations and advertising which is currently paid for by the fund members.
re horoscope.
agree with his comments what i cant understand is that it has taken highly paid politicians over 30 years to realise super needs an overhaul.there management fees in these days of technology are 10 times more than necessary.
Did Mr Jones make the mistake, or was it made by the person reporting it?
Did Mr Jones make the mistake, or was it made by the person reporting it?
Did Mr Jones make the mistake, or was it made by the person reporting it?
Did Mr Jones make the mistake, or was it made by the person reporting it?
Mjp after you post check the number of times it has been reproduced and delete the excess number of posts.
I agree, both investment fees and administration fees need to be looked at. Both can erode retirement savings in superannuation
As usual, Scottyfrommarketing is all about presenting something that sounds good, as long as you don’t scratch the surface. It’s always fluff without substance.
Of course all fees need to be looked at. As for sticking with the same fund, that should be possible, but not compulsory. People should have the option to change super funds like they do bank accounts.
Fedup. As per the whole of the political process. Singling out one pollie is a tad naive.
Fedup, you are quite right. All piss, no wind. He may be a typical politician, like inextratime says, but Scotty for Marketing is a past master at bullshit
No way does Scotty from Marketing want to restrict fees and profits to his campaign funders.
The less money they make, the less they have to contribute.