By 30 June 2010, a Government-appointed panel will finalise its review of Australia’s superannuation system – warts and all! Before the Review panel delivers this report however, there’s a lot of work to be done.
The panel, appointed in May 2009 (and two extra panel members appointed in August 2009), is overseeing the ‘Review into the governance, efficiency, structure and operation of Australia’s superannuation system’. The panel has committed to three phases of issues papers, submissions, preliminary reports, consultation and then, a final report delivered to the Government by 30 June 2010 (see table below).
Source: Super System Review website
Communique of Principles
The Super System Review (SSR) effectively began on 28 April 2009, when the then Minister for Superannuation and Corporate Law, Nick Sherry, released a ‘Communique of Principles’ for superannuation in conjunction with eight superannuation industry associations announcing the following:
After 20 years of compulsory superannuation and the development of numerous new features, often developed without systemic analysis, it is timely to ensure our system continues to operate with efficiency and sustainability.
As such, and with these Principles in mind, we agree that it is prudent that the current operational features of our superannuation system be examined.
We further agree that such an examination be conducted across the system as a whole and complement the work underway by the Australian Future Tax System review.
It is critical that any outcomes of such an examination be the subject of appropriate transitional arrangements, are prospective with appropriate grandfathering and include transition periods relevant to prevailing market conditions.
In the April 2009 edition of THE SOAPBOX, I flagged that no consumer groups were involved in the communiqué supporting the review, and nor were DIY super (SMSF) trustees directly represented, even though DIY super trustees control one-third of all superannuation wealth. Significantly, the major accounting associations had not participated in the communiqué even though apart from consumer groups, they have the closest contact with Australian consumers via tax strategies and tax returns.
Terms of reference and expert panel
On 28 May 2009, the Government released the Super System Review’s Terms of Reference, and announced the members of the expert panel:
- Jeremy Cooper (Chair) (former Deputy Chair of ASIC)
- Sandy Grant (industry funds background)
- Brian Wilson (funds management background)
- Kevin Casey (retail super background, mainly at AMP)
- Greg Evans (economist and business background)
- David Gruen (Treasury representative)
In the June 2009 edition of THE SOAPBOX, I pointed out that the panel chair, Jeremy Cooper, and the five part-time panel members, have excellent credentials and years of industry experience, BUT again there is no representation on that panel from consumer groups, or from organisations representing SMSF trustees. And… in case you hadn’t noticed – there were no women on the panel, even though women represent 50% of fund members.
I was one of many individuals, and organisations, to flag the lack of SMSF representation and gender imbalance. Unfortunately, I was a single voice when calling for consumer representation on the expert panel, although privately, many within the super industry acknowledged the consumer gap.
On 4 August 2009, the new Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, announced two additional members for the Review’s expert panel:
- Meg Heffron (SMSF specialist)
- Ian Martin (funds management background)
Although worthy appointments, the expert panel continues to suffer from a marked gender imbalance, and total lack of consumer representation.
Three phases of super review
On 25 August 2009, the Chair of the Super System Review (SSR) announced that the SSR would be taking a three-phase approach:
- Phase One: Governance;
- Phase Two: Operation and Efficiency
- Phase Three: Structure (including SMSFs)
According to the SSR, each phase follows the same format:
- Release of an issues paper
- Time to prepare submissions: Approximately 6-8 weeks for interested parties to make submissions in response to the themes and issues raised in each issues paper
- Release of preliminary recommendations (although the Review panel recently announced that no recommendations would be made until the three phases of the review had been completed)
The Review panel is consulting with major stakeholders (not sure if this includes consumers) throughout the Review period.
Phase one: Governance
On 25 August 2009, the SSR released the Phase One: Governance Issues paper. Some of the issues raised in the Issues paper included:
- trustee knowledge
- trustee skills and training
- conflicts in outsourcing
- accountability to members
- composition of boards of trustees
Interested parties had until 16 October 2009 to make submissions, and on 14 December 2009, the SSR released a preliminary report titled ‘Clearer Super Choices: Matching Governance Solutions’. I discuss this report in the December 2009 edition of THE SOAPBOX.
Note: The SSR has advised that if anyone intends to respond to the Phase Two preliminary report, then any submissions should be made as part of the Phase Three submission process (see below).
Phase two: Operation and Efficiency
On 16 October 2009 (the same day as submissions for Phase One closed), the SSR released the Phase Two: Operation and Efficiency Issues paper. The issues paper included the following issues:
- fees and charges (such as, should high fee funds display a red traffic light warning?)
- comparability of funds
- defaults
- use of technology (when is the super industry going to move from paper-based processing?)
- competition (such as, do we need fewer but larger super funds?)
- administrators
- complexity
The closing date for submissions to Phase Two was 14 December 2009, and a preliminary report will be published in March/April 2010.
Phase three: Structure (including SMSFs)
On 10 December 2009, the Super System Review (SSR) released a statistical summary of self-managed super funds (SMSFs), or you can check out the highlights of the summary in SuperGuide’s article Shining a Government spotlight on SMSFs: a summary.
The SSR has released the statistical summary on SMSFs, due to a concern that there was insufficient publicly available data on the SMSF sector. The greater concern was that this lack of public data would affect the quality and value of submissions relating to the SMSF sector in Phase Three.
The SSR Chair, Jeremy Cooper said:
…We think [the statistical summary] will fill an information vacuum and clarify quite a few misconceptions about SMSFs.
On 14 December 2009, the SSR released the Phase Three: Structure (including SMSFs) Issues paper. The issues paper includes the following issues:
- structural issues
- SMSFs
- defined benefit funds, small APRA funds, RSAs, ADFs, and public sector funds
- insurance
- superannuation in post-retirement phase
- women, indigenous fund members
The closing date for submissions to Phase Three is 19 February 2010, and a preliminary report will be published in April/May 2010.
Note: The SSR panel strongly recommends that anyone intending to make a submission in response to the Phase Three issues paper, should also read the Phase One Preliminary Report, and consider the comments contained within this report when making submissions on Phase Three.
Final report
The SSR will provide a final report to Government by 30 June 2010.
You can visit the Super System Review website for more information on review process, or to obtain copies of any of the issues papers or reports.
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Copyright Trish Power
Hi - I'm Trish Power and I am the author of
Notice that most of the people on the panel (even the revised one) are involved in the business of convincing people to part with their wealth – in particular cash.
The Government is concerned that the SMSF sector is diverting wealth away from the retail sector (mainly big banks and a large life insurer) so you can bet they (the panel) are working out ways to inhibit SMSF growth (increased legislation, governance etc) to a point where people give up and fall back into mainstream super.
Cheers
There really needs to be both consumer & SMSF representation in this whole process, otherwise what AlanM says is more likely to come to pass. There is potentially serious conflicts of interest given the current makeup of the panel.