August 22, 2002

Don't make superannuation any riskier

Send a short message to the politicians:

Dear
I strongly oppose moves to allow superannuation fund managers to compete for employees' 9% Superannuation Guarantee Levy funds, as now proposed by both the Howard government and the Labor Opposition.
Employees have very little chance to genuinely test the advertising claims they will receive from fund managers that will promise ever bigger retirement incomes. But it is the employees who will take all the risks. And the risks will be higher for promised higher returns.
Employees now in the 55-65 age bracket, and considering retirement, have just received a big shock, having lost significant funds in the last 12 months.
Both the government and the Labor proposals show more concern for stock brokers and fund managers desperately looking for new investors, than for employees and their interest in a secure and dignified retirement, or for less speculative activity and more genuine investment of national savings.
Yours sincerely,

Send to:

Senator Nick Sherry Opposition Finance Spokesperson

Parliament House

CANBERRA ACT 2600

Email: Senator.Sherry@aph.gov.au

Peter Costello, Federal Treasurer

Parliament House

CANBERRA ACT 2600

Fax: 02 62733420

Email:ministerial@treasury.gov.au

Senator Bob Brown, Leader of the Australian Greens

9th Floor Marine Board Building,

1 Franklin Wharf, HOBART TAS 7000

Email: senator.brown@aph.gov.au

Fax: 03 6234 1577

Senator Aden Ridgeway, Australian Democrats

10 Roberts St

ROZELLE NSW 2039

Email: Senator.Ridgeway@aph.gov.au

Fax: 02 6277 5727

Background on the super debate

The Federal Labor Party recently switched its six-year opposition to the Howard government's plan to introduce 'choice' in superannuation schemes for workers.
On August 2, 2002, Labor said it would support the government's proposal, with strict conditions to protect workers.
However, given the sharp shock many would-be retirees have just received with the annual report on their super accounts, Labor's about-face should be closely scrutinised.
Under the present arrangement, the Superannuation Guarantee Levy - set at 9% of gross salary since July 1, 2002 - must be paid into a designated industry super fund, which has equal representation on its Board of Trustees from both the unions and employers in the relevant industry.
The Howard government has always opposed unions having any role in overseeing the use of these super funds, because it is another form of legitimacy for unions. So Howard has used the mantra of 'choice' to try to undermine industry super funds, and direct more funds into the management of big banks and insurance companies.
Originally Howard proposed that employers be required to offer a choice of five super funds to employees. This was opposed by Labor, who said that workers would lose out. It was opposed by employers, who feared that they may be sued for advising that the selected five super funds were 'sound' options in case one or more performed very badly. Labor, the Democrats and Greens have consistently voted against the Howard proposal since 1996.
The new Superannuation Legislation Amendment (Choice of Superannuation Funds) 2002 would take effect on July 1, 2004.
In the Bill, the Howard government abandons the proposal for five options for workers, and instead allows the company or the employee to propose any super fund, but the individual employee and the employer have to agree. If there is no agreement, the default fund is the one defined in the relevant Industrial Award. If there is no award fund, then the default fund is the majority fund. Choice can over-ride the award-specified fund, but does not apply if there is a certified agreement or individual contract (AWA) which specifies a fund.
Labor is now prepared to support the Bill, and allow absolute choice, thus overriding collective certified agreements, but with the following protections:

• Online access to account details for all super fund members
• Full disclosure to members of any fees, charges and commissions

• A cap on fees and commissions on compulsory super contributions

• Measures to stop super funds from paying employers to promote their products

• All employees to have the right to 'salary sacrifice' to make contributions to superannuation above the compulsory amount

• Cut in tax on superannuation contributions from 15% to 13% for everyone, or to 11.5% for people over 40.

• No entry and exit fee for switching funds from one super fund to another

• No employer veto over an employee's choice of fund.

The Australian Council of Trade Unions is surprised at Labor's about-face, and is opposed to the Bill. It has told Senator Sherry that collective bargaining is the best way to protect workers' interests, and that allowing funds to be selected through this method had not previously been opposed by any political party. The industry super funds network now offers the lowest cost option for workers' superannuation, compared to products offered by banks and life insurance companies.
(See the ACTU case at its website: www.actu.asn.au)
However, the current award super schemes use the mainstream fund managers to invest their funds, according to guidelines decided by fund Trustees.
The entire superannuation industry is heavily supported by income tax breaks, yet there are no restraints on fund managers to push investment into projects which advance broad Australian national goals like full employment, adequate infrastructure, environmental sustainability and emerging products and services.
The tax breaks to the wealthy for superannuation are very large. This could be reformed while still providing strong incentives for super, and at the same time providing more income tax to finance much needed government programs in health, education, housing and the environment.
Neither the Howard Government nor the Labor Party are heading in this direction with their superannuation policies, despite the sobering impact of this year's stock market crashes on superannuation funds.

Peter Murphy
Now We The People