Roundtable on choice of superannuation
funds
Senator John Watson, Chair of the Senate Select Committee
on Superannuation and Financial Services, today tabled the Committees
report on the evidence it received from twenty organisations, drawn together
to identify the best features involved when considering a greater availability
of superannuation fund choice.
The evidence received reflects the views of representatives
from government, the superannuation industry, service providers to industry,
consumer advocates, employer and employee bodies and the major consulting
groups.
These people made themselves available at short notice
to assist the Committee to gauge views on such important issues as:
the options for the form of choice; preconditions and other measures which would need to be in place prior
to the introduction of the choice option; other implementation issues associated with the introduction of the
choice option, including the arrangements for default funds, insurance,
asset allocation and frequency of payments of employee contributions; prudential supervision and consumer protection issues; investment choice; and the timing of the introduction of the choice option.
Senator Watson also said that, although many of these
issues were addressed during the previous Committees inquiry into Choice
of Fund in 1998, the 1999 roundtable provided an important forum for revisiting
the issues, and for exploring the possibilities associated with emerging
technologies, such as e-commerce.
In reflecting the overall flavour of the evidence, Senator
Watson said that:
From the roundtable discussion and submissions made to
the Committee, it was evident that there was not a unanimous position.
Views fell into three broad categories; those who support fund member
choice with few reservations; those who believe fund member choice will
not be in the interests of fund members; and those who believe fund member
choice can be made workable subject to a range of conditions being met.
In an atmosphere of spirited discussion, all groups indicated
their support for adequate protective measures, including a standardised
approach for disclosure of fund details and an extensive education campaign.
There was also debate on mechanisms to address the respective rights of
both employers and employees.
Senator Watson said that The Committee has not drawn any
conclusions from the evidence, nor made any recommendations, but presents
this report in order to progress public debate on the complex issue of
choice of superannuation fund.
A summary of the views expressed on the major issues is
attached.
| For comment: |
Senator John Watson
Chair
|
02 6277 3685 (Canberra) or
03 6331 4544 (Launceston, TAS) |
| For information: |
Sue Morton
Secretary
|
02 6277 3458 or
0416278258 |
| Internet access: |
https://www.aph.gov.au/senate/committee |
|
| Email: |
super.sen@aph.gov.au |
|
ATTACHMENT:
OVERALL SUMMARY OF VIEWS ON CHOICE OF SUPERANNUATION FUNDS
Options for the form of choice
The Committee recognised that some participants were opposed
to the concept of choice. However, there was a body of opinion that, should
it be introduced, the option favoured by the majority was for unlimited
choice. Support was also expressed for the award fund as an alternative.
Disclosure and education
Most witnesses agreed, that for consumers to be able to
make informed choices, there was a need for an appropriate and standardised
disclosure regime and an extensive awareness and education campaign. There
was also agreement that the disclosure regime should come well before
the commencement date for choice. However, different views were expressed
on the timing of the education campaign.
E-commerce
Witnesses generally agreed that e-commerce had the potential
to reduce administration costs for some fund members and some employers,
particularly if standard protocols were in place. While some witnesses
queried Australias readiness for e-commerce, and pointed to the difficulties
likely to be experienced by small business, others pointed to the significant
cost and other advantages which were likely to be derived.
Other implementation issues
A number of other implementation issues were raised by
participants. Witnesses generally supported maintaining the existing practice
of the default fund being the relevant award fund where there is award
coverage; and where there was no award coverage, the favoured option was
that the majority fund in the workplace be the default fund.
The arrangements to ensure continuity of insurance cover,
the need to address the problems of cross-subsidies and the questions
of the cost and level of insurance cover, were also emphasised by witnesses.
A number of witnesses also recommended that asset allocation be a minimum
standard for default funds.
Almost all witnesses favoured monthly, or at least quarterly
contributions by employers to employee superannuation funds, instead of
the current annual contribution. Some witnesses pointed out that there
were advantages, particularly for small business, to contribute quarterly
to be more consistent with taxation requirements.
Prudential supervision and consumer protection issues
Evidence to the Committee was strongly in favour of appropriate
prudential supervision and consumer protection measures, in addition to
those provided by full disclosure and adequate education, to address the
issues of commission based selling, and other related practices. There
was also general agreement on the need for an effective dispute resolution
mechanism, with a number of suggestions being made to address the capability
of the current mechanisms.
Investment choice
Witnesses drew attention to the increasing number of options
for investment choice, but pointed out that the take-up rates varied among
funds offering investment choice. The main factor for this appears to
be a lack of awareness and education in relation to the range of investment
available; other factors include the possible costs involved in switching
between investments and account balance.
Timing
While there were many different points of view expressed
on the timing of the introduction of a choice regime, there was general
agreement that:
implementation be a staged process; the first stage be no earlier than 1 July 2001; whatever date is chosen be dependent not only on the finalisation
of the legislation and prudential supervision regulations, but also
on an appropriate and standardised disclosure regime and the conduct
of an appropriate education program; the start-up date be 12 months after the finalisation of the above
(including the CLERP 6 reforms) as well as other measures being in place
such as standard protocols for e-commerce); and there was a probable need to defer the extension of choice to defined
benefits funds because of the difficulties which would be involved in
identifying what should be transferred and when.
Top
|