Treasurer Josh Frydenberg described the Your Future, Your Super Bill as the most significant change to super since its introduction in the 1990s, and said consumers could expect savings of more than $17 billion once it came into law.
“[The reforms] will drive lower fees, improve fund performance and prevent the creation of millions of unintended accounts,” he said.
“There are many Australians who would have asked the question: why has it taken this long? The reality is, it is pretty hard to get some of these reforms through the Parliament, as we have seen in the Senate, because there are so many vested interests fighting hard against more transparency, more accountability and lower fees,” Mr Frydenberg said.
The laws intend to eliminate multiple superannuation accounts, which the Productivity Commission estimated cost members $2.6 billion annually in extra fees and insurance premiums.
Superannuation funds will now also face an annual performance test, public ranking by the Tax Office and the loss of an easy source of new members.
Negotiations came down to the wire. Independent senator Rex Patrick cast the bill’s passage into doubt on Monday when he declared he had the numbers on the crossbench to gut large swaths of the legislation.
But the bill passed mostly intact in the final vote.
It is understood Mr Frydenberg was involved in the negotiations on the bill, which the government views as the most important set of reforms to Australia’s superannuation system since its introduction.
The entire package is directed at improving the bulk of underperformers and strengthening the hand of the regulator.
— Xavier O’Halloran, Super Consumers Australia director
To secure crossbench support, the Coalition dumped a “backdoor” veto power that critics said would have given the government sweeping authority to decide what was in members’ best financial interests.
This could have included prohibiting investment in the housing sector or preventing a fund director from also being a union official, experts said.
The decision to axe the power was critical to obtaining the votes of independent Jacqui Lambie and Senator Griff. It followed the government’s decision to drop a similar provision allowing the Treasurer to veto investments to secure the bill’s passage through the lower house.
The package passed the Senate 34 to 30 after the government secured the support of senators from One Nation, Centre Alliance and Senator Lambie. The bill subsequently passed the lower house on Thursday night.
Senator Lambie said she did not want to “let the perfect be the enemy of the good”.
“If this bill gets a bit of extra money in people’s super, it’s only going to be a good thing,” she said.
After negotiations with the crossbench, the government also amended the bill to delay the package’s signature “stapling” mechanism, which is designed to reduce the prevalence of duplicate accounts, until November 1. It had been intended to come into force on July 1.
The stapling measure means a person’s first super fund will automatically follow them when they switch jobs, though workers can still choose to switch funds if they wish.
Labor voted against the package, arguing the stapling mechanism risked locking Australians into underperforming superannuation funds, echoing the concerns of Industry Super Australia, which said the laws could “trap millions of Australians into dud super products, costing them almost $230,000 from their retirement savings”.
Regulator’s hand strengthened
But Super Consumers Australia director Xavier O’Halloran labelled the idea of consumers being locked into underperforming funds “a fantasy”.
“The entire package is directed at improving the bulk of underperformers and strengthening the hand of the regulator, so it can drive mergers where long-term underperformance is identified,” he said.
Other reforms include annual performance tests for super funds and a requirement for funds to ensure all expenditure is motivated solely by the “best financial interests” of members.
It had appeared yesterday the government had secured One Nation’s support by agreeing to back an amendment increasing the concessional contribution cap for workers aged 67 and over.
But the amendment was pulled on Thursday, with Labor financial services spokesman Stephen Jones telling the Financial Review the government backtracked on the deal after it became “embarrassed” at the prospect of giving a “$5000-a-year superannuation boost to politicians”.
Labor accused One Nation leader Pauline Hanson, who turned 67 last month, of pursuing her own self-interest in the negotiations.
Mr Frydenberg condemned Labor’s “outrageous” attacks against Senator Hanson, calling them a “slur”.
The government also passed a separate superannuation bill on Thursday enabling individuals aged 65 and 66 to make up to three years of non-concessional superannuation contributions under the bring-forward rule.
Financial Services Council chief executive Sally Loane said “the changes to contribution arrangements for older Australians will make it easier for them to manage their superannuation and retirement planning”.