Relief for financial advisers to meet their ongoing fee disclosure obligations
19th May 2021
Thank you for that introduction, and thank you to the Australian Institute of Superannuation Trustees for holding today’s session.
It is an honour to cap off proceedings today by talking about the Budget and the future directions of superannuation policy.
This Budget shows the Australian economy is recovering faster and stronger than we could have imagined.
The speed of our economic recovery has exceeded expectations and Australia has outperformed every single major advanced economy in 2020.
As the Treasurer said, our economic engine is roaring back to life and now is the time to secure Australia’s future.
The Morrison Budget supports Australians through COVID‑19 by extending our health response, extending tax relief and incentives, creating more jobs and getting more Australians back into work.
It guarantees the essential services Australians rely on - from childcare through to aged care.
And it builds a resilient and secure country that provides its citizens with the freedom and opportunity to reach their full potential.
The Budget lays the foundations for Australia to be a leading digital economy by 2030.
Digital Economy Strategy
Almost nine in ten Australian firms adopted new technology to cope with the disruption of COVID.
In just eight short weeks, McKinsey estimated that Australia had vaulted forward five years in our digital adoption for both consumers and businesses.
We now have an opportunity to keep that momentum going.
We must build on what we have learned over the past year to best equip Australia for the next great productivity leap - which in turn will provide economic growth and high wages for all working Australians.
The Government is investing $1.2 billion in Australia’s digital future through the Digital Economy Strategy with investments into artificial intelligence, supporting digital skills, enhancing Government services, and supporting businesses to build their digital capability.
Women’s Budget Statement
I also want to talk about the Women’s Budget Statement - a significant component of this year’s Budget.
When women are safe, economically secure and healthy it provides benefits for individuals, families, businesses, and the economy more broadly.
In this Budget, we have committed $3.4 billion to improve women’s safety, economic security, health and wellbeing.
We are providing financial support for women to escape family and domestic violence, improving the affordability of childcare for Australian families, and providing more opportunities for women to pursue their chosen career pathway.
We are assisting women to upskill into higher paid work, have committed record investment into areas of women’s health and created more ways for single parents to secure a home through the Family Home Guarantee Scheme.
On our retirement income system, the Morrison Government’s arc of superannuation reform is squarely aimed at modernising a system that was designed almost three decades ago.
Opacity and underperformance have been key drivers of inefficiency, and baked in structural inequities have left too many Australians behind.
Since its inception, our super system has been inflexible for those who have taken career breaks or who work part time.
It has also been inflexible for older Australians, who have not enjoyed the benefits of a mature system, wishing to manage their retirement savings by making voluntary contributions later in life.
The Morrison Government has been focused on improving efficiency and flexibility, rectifying structural inequities and increasing transparency for members - bringing our superannuation system up to speed and into the twenty-first century.
We are making sure that our system is always, without exception, working in the best financial interests of its members.
On Budget night, the Treasurer announced that the Government will remove the four-fifty per month threshold where employees currently do not have to be paid the Superannuation Guarantee.
I know AIST has long advocated for this change. As have I.
The $450 rule is an anachronism from the times of a 450 dollar per month income free tax threshold and well before digitised pay rolls were even imagined. This structural inequity was leaving behind our most vulnerable workers - those in low income work, and those who work part-time or multiple jobs - and we know that over two-thirds of these workers are women..
Without the reduction in fees for low balances in the Protecting Your Superannuation legislation, and without the introduction of single touch payroll, this baked in discriminiation couldn’t be rectified before now. But I’m excited to say that the Morrison Government has ticked those boxes.
The Retirement Income Review indicated this change would extend superannuation guarantee payments to about 300,000 low-income workers, ultimately benefiting around 200,000 women.
The Government has also been speaking for some time about the importance of flexibility in super.
Flexibility for older Australians to manage their retirement savings to suit their individual circumstances and the flexibility to save more for their retirement than is mandated by the Superannuation Guarantee.
This is particularly important for people who are self-employed, taking career breaks or haven’t benefited from a full career with a mature superannuation system.
In this Budget the Government will reduce the eligibility age for the downsizer contribution from sixty-five to sixty years.
This will allow more people to contribute to their super and downsize their homes sooner, freeing up larger homes for younger families.
The downsizer program has been an enormous success with around twenty-two thousand individuals - more than half being women - have made a downsizer contribution since the scheme first began in July twenty-eighteen.
Under the same banner, the Government will remove the work test for non-concessional contributions.
The work test requires people to work at least forty hours during a consecutive thirty-day period each income year before they can make voluntary super contributions.
As it stands, the work test limits people who have not had the benefit of compulsory super throughout their working lives the opportunity to make contributions that would help secure their retirement.
The Government will also increase the flexibility and attractiveness of the Pension Loans Scheme.
This Scheme allows individuals to supplement their income in retirement by borrowing against the equity in their property, assisting older Australians to maintain living standards in retirement.
To improve the Scheme we will introduce a No Negative Equity Guarantee. This will give certainty your debt cannot exceed the value of your property. We will also allow retirees to access capped advance lump sum payments.
As the Retirement Income Review made abundantly clear, your quality of life in retirement is made up of efficient and effective use of all three pillars, including the Aged Pension and savings outside of superannuation.
Retirees should have confidence to draw down on their retirement savings knowing that the Age Pension will always be there to support them should their savings not last as long as they planned.
Let’s be very clear here. This is not about forcing retirees – current or future - to draw down on savings through rigid policy settings or punitive regimes that restrict their choice and agency. In fact quite the opposite. It’s about giving retirees control of their retirement income no matter what the economic circumstances. And the flexibility and the confidence to use their assets more effectively should they choose to do so.
These changes come on the back of the Your Future, Your Super reforms announced in the October Budget last year.
Swimming upstream against a torrent of critics to make our system better, fairer and more efficient for its members has been no easy feat, but the futures of Australian retirees depends on it.
The Your Future, Your Super package is estimated to benefit members by around $17.9 billion over the next decade.
Today, Australians are more likely to move between jobs and industries and for most people superannuation as their primary - if not only - vehicle for their retirement savings.
Our system is complex. It’s compulsory. It’s opaque. And it’s been plagued by disengagement. But as more Australians rely on superannuation as their primary source of retirement income much more is at stake financially than it was at superannuation’s inception.
Those vestiges of a past system that tied retirement savings to workplace relations have endured. Super needs to adapt to better meet the needs of a modern workforce. And its structural flaws - unintended multiple accounts and entrenched underperformers - are harming millions of members.
The Your Future, Your Super Bill addresses the Productivity Commission’s recommendations.
It enhances the system by making member’s superannuation accounts follow them from job-to-job.
It makes it easier to choose a better fund, with a consumer facing Your Super comparison tool.
It holds funds to account for underperformance
And it increases transparency and accountability.
That’s the high-level overview, but as you know, we’re now getting down to the details.
We’re calling for comment on the draft regulations underpinning the changes and I invite you all to have a say before the twenty-fifth of May this year.
You can comment on the information that must be included with the notice of an Annual Members’ Meeting.
Already, the Government has listened and made several amendments to strengthen the performance test, such as including administration fees.
This focuses the test on the final member outcome and is consistent with information presented to consumers via the online YourSuper comparison tool.
To improve accuracy, we’ve also added unlisted infrastructure and unlisted property as specific asset classes covered by the performance test.
It will strengthen the focus of the test on investment outcomes delivered to members while also ensuring that Australian superannuation funds can invest with confidence in these unlisted assets at home.
These changes will increase transparency for members and accountability for super funds.
And for trustees - similar to the arrival of APRA’s performance heatmaps - this will bring an occasion for serious introspection.
For many underperforming funds, trustees will reach the inescapable conclusion that their members are better off being part of a better fund - indeed if our reforms prompt a trustee to hand over the keys to someone who will do a better job on behalf of their members - that is a welcome outcome of our reforms.
As always, my door is open, and I look forward to your constructive comments as our policy agenda continues.
I don’t want to finish without touching on the future direction of superannuation policy.
So much of the discussion around retirement is about accumulation – and that’s been understandable in an industry that has spent the last thirty years growing and maturing. But we know the purpose of our retirement income system is to do just that: provide income in retirement and smooth consumption between working life and retirement.
This is why the Morrison Government is committed to progressing the Retirement Income Covenant, which at its core will require trustees to have a strategy to generate higher retirement incomes for their members.
The Covenant allows super funds the flexibility to tailor their retirement income strategy to their specific membership base, while also allowing them to deliver solutions they think will work best for the particular cohorts of members in their fund. Once we pass the Your Future, Your Super reforms, this is the next cab off the rank.
So, in closing.
The Budget is all about the next phase of the Morrison Government’s Economic Recovery Plan for Australia, with targeted spend and innovative investment to create more jobs and secure our future.
It’s a Budget that first and foremost continues to protect Australians lives and livelihoods from the ravages of COVID, it’s a Budget that creates more jobs, guarantees essential services and builds a more resilient and secure Australia.
The Budget provides a roadmap to continue Australia’s momentum in the Digital Economy
It supports the safety, economic security, health and wellbeing of women.
And it delivers greater flexibility for our retirement income system.
Thank you again to AIST for hosting today’s conference.
I look forward to working with you as we continue to modernise our superannuation system - ensuring it works harder for members, putting their interests above all - after all that is our role and our responsibility.