Super Smart

Senator Nick Sherry, Minister for Superannuation, has been active during the recent financial meltdown in speaking to the press and interested financial organizations about the Government’s proposed agenda on superannuation. Some of the key areas of interest and significance which he identified included:

§ “Superannuation is a long-term investment. You generally don’t access it for 30 to 35 years.” (ABC Radio interview, 1 October 2008). This message is one of reassurance in a declining investment market with a strong co-relation to superannuation account balances. Senator Sherry advised members of superannuation funds to take a long-term view of their investment in spite of the short-term market fluctuations. Don’t panic is the message!

§ Fees, charges and fund performance of default funds will be closely scrutinised to ensure that the fund selected for an industrial award is performing well. The matter of including superannuation as an “allowable matter” in an industrial award is presently being considered by the AIRC and submissions from interested parties have been made. Senator Sherry sees a role for APRA in monitoring and publishing data on the performance of default funds selected for various industrial awards. This would mean that where an employee working under an industrial award did not nominate a fund of choice, the employer would be obliged to pay contributions into the nominated default fund.

§ Senator Sherry announced that the level of lost super as at 30 June, 2008, had increased to $12.9 billion from $11.9 billion the previous financial year. This represents funds in 6.4 million lost super accounts. He described this as “a major structural inefficiency in our retirement system” and advised that the Government would reunite people with their lost super using TFNs. This automatic consolidation would be a “more efficient and cost-effective way to solve the problem”. (Media release: Liberals Lost Super Legacy Continues to Grow).

§ He reiterated the importance of simplifying Product Disclosure Statements for fund members so that members can read and understand them easily. In short, these documents should be “user friendly” rather than jargonistic and legalistic. He stated: “I want to ensure that consumers are not faced with 50 to 100 pages of fine print they would need a finance (or a law) degree to understand”. (Speech, 8 Oct, 2008, ANZ Survey of Adult Financial Literacy in Australia).

§ The Minister called for corporate responsibility and sustainability in his address to the Committee for Economic Development of Australia. Environmental, social and fund governance issues have the potential to produce a great impact on superannuation savings over time. He indicated that fund investments as well as responsible governance were vital to a sustained and profitable superannuation industry. Consideration of climate change is integral to this process. He favoured the current practice of some super funds which use information on a company’s environmental and social performance before deciding to invest in it.

These areas of focus represent significant enhancements to our world class superannuation and retirement system. In my view improving member financial literacy and considering corporate responsibility before investment are ongoing areas where enhancements must be made. The consolidation of lost super is a long overdue reform to reduce the duplication of account fees. And the inclusion of superannuation as an “allowable matter” in industrial agreements is to my mind – commonsense!