Workers must come first with super, says Kelly O’Dwyer

The Australian, January 31, 2017:

The federal government will take on the superannuation industry over laws to protect fund members in a push to inject new blood into the boards that control $2 trillion in employee savings.

Declaring workers “must come first” in the overhaul, the government is preparing to legislate tougher rules that will force funds to appoint more independent directors in a bid to overcome years of objections to the reform.

Financial Services Minister Kelly O’Dwyer put the industry on notice yesterday to prepare for a renewed parliamentary debate over the contentious changes, which are fiercely resisted by ­industry super funds backed by unions and employer groups.

Ms O’Dwyer is also telling fund leaders she has “every intention” of seeking to legislate a plan to allow all workers to choose who manages their money, overcoming restrictions in workplace deals favouring funds backed by unions.

After a bruising fight over super tax increases last year, the government is turning its sights on the way funds are managed while attacking Labor for proposing further tax increases on ­retirement savings. While the government raised about $3 billion in net terms over four years from its super tax changes passed by parliament last year, Labor’s policy is to raise another $1.5bn by cutting further concessions.

“They, and the Greens, promise significantly higher taxation on superannuation savings,” Ms O’Dwyer said in a speech to super fund chairs yesterday.

Ms O’Dwyer criticised Labor for opposing concessions that would help small business owners contribute to their super or encourage “catch-up contributions” from women who took time out from the workforce. The government had months of internal brawling over the super tax changes last year amid fears the reforms cost Malcolm Turnbull votes at the July election, but the minister’s speech sought to allay fears over further changes.

“For this social bargain to work, governments must continue to offer generous tax concessions,” she said.

“That is, people pay significantly less tax on their contributions, investment earnings and retirement income streams than they would if they were paying their marginal tax rate.”

The Senate blocked government attempts in 2015 to force all super funds to ensure one third of their trustees were independent, including appointing an independent chair. Labor, the Greens and crossbenchers Glenn Lazarus, John Madigan and Jacqui Lambie sided with industry super funds to oppose the changes. Industry Super Australia plans to put forward alternative governance changes set out in a report due soon from former Treasury secretary and Australian Super chairman Bernie ­Fraser.

The bill to improve super fund choice will seek to overrule provisions in workplace agreements that give preference to industry funds even if a worker prefers to use a self-managed super fund.\

“We estimate these changes will allow for about an extra one million workers to choose their fund,’’ Ms O’Dwyer said.