Assistant Treasurer Bill Shorten has unveiled the first tranche of legislation to implement its proposed low-cost superannuation product MySuper.
In his second reading speech of the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011 yesterday, Shorten said the MySuper products would replace existing default investment options in default funds from 1 July 2013.
The first tranche of the measure, aimed at making retirement savings funds more accessible to more people, does away with contribution limits and sets out an authorisation structure, among other things, Shorten said.
"MySuper products will have a simple set of product features, irrespective of who provides them," Shorten told Parliament in his second reading of the draft legislation," he said.
"Therefore, the Bill requires APRA [Australian Prudential Regulation Authority] to be satisfied that a MySuper product has some core characteristics."
The characteristics include that no limits are placed on the contributions that a trustee of a MySuper product will accept, except for certain contributions to be prescribed by the regulations; and a member cannot be transferred out of the MySuper product unless to another MySuper product or unless the member consents.
APRA will be able to accept applications for MySuper products from 1 January 2013, he said.
Additional funding of $29.9 million over four years will be provided to APRA and ASIC that will be recovered through increases to the annual levy on APRA-regulated superannuation funds.
"Subsequent tranches of legislation will introduce the remaining measures relating to MySuper," Shorten said.
In response to the amended MySuper Bill, FPA general manager of policy and government relations Dante De Gori said he was disappointed with the amended Bill as it still did not disclose details on intra-fund advice costs.
De Gori said the advice association's position has not changed and believes in fairness, equity and transparency for fund members.
He said the FPA believes an intra-fund fee should be transparent or perhaps even labelled as a separate fee.
The Australian Institute for Superannuation Trustees (AIST) chief executive Fiona Reynolds said while it's good to see the government acknowledging that flipping is a significant issue, it needs to be outlined in legislation.
"We intend to keep the pressure on the government until this happens as this is a key consumer protection issue for MySuper members who run the risk of being flipped into higher fee funds when they change jobs. This is important as the average worker changes jobs every seven years," Reynolds said.
"It's also encouraging to see that the legislation tightens the definition of administration fees - it's now much more clear what should be classified as an administration fee as opposed an investment fee. This will improve transparency and comparability of all costs in MySuper funds."
She said the introduction of trustee duties, which include a clearly defined investment return target for eligible rollover funds is also welcomed.
"This closes off another loophole in terms of flipping and will hopefully put an end to the some of the fee-gouging cash cows that exist in this sector," she said.
"We also welcome measures to allow some members of tailored MySuper products to choose to remain within the product when they cease being an employee of the related employer. This is an additional safeguard against flipping."
