SUPERANNUATION funds owned by the big banks are notching a win, after the government struck a last-minute agreement with the industry over the design of its low-cost super plan.
The Assistant Treasurer, Bill Shorten, yesterday said super funds would be able to charge members different fees under MySuper, a no-frills super product being introduced from July 2013.
MySuper is set to spark the biggest overhaul for the $1.3 trillion super industry since its introduction in 1992, by requiring all funds to offer a no-frills product with low fees and no commissions.
However, in a reprieve for the for-profit sector, final details unveiled by Mr Shorten went against earlier Treasury recommendations that MySuper funds be required to offer a single pricing point.
Retail funds had lobbied fiercely against uniform pricing, saying it would prevent them from offering better deals to large employers, while union-affiliated industry funds had sided with Treasury.
The chief executive of the Financial Services Council, John Brogden, welcomed yesterday's announcement of flexible pricing, describing the package as "balanced and measured".
"The improvements announced today are a big win for a more competitive and flexible MySuper," Mr Brogden said.
Mr Shorten defended his decision, saying he would not stop funds offering discounts to large employers.
"One thing we're determined to do is to see as many good deals as possible for people and still maintain transparency," he said.
After last-minute talks with the industry, Mr Shorten also revealed the final timetable for MySuper's introduction.
Workers who have not chosen a fund will have their super contributions paid into a low-cost MySuper fund from October 2013, while all default balances will be shifted to MySuper by 2017.
"By 2017, the vast majority of superannuation balances in Australia will be commission-free and by 2013 all new superannuation contributions will be commission-free," Mr Shorten said.
The final details have been reached after months of intense discussion with industry through a working group chaired by the former general manager of the Future Fund Paul Costello.
While retail funds welcomed the changes on pricing, the government will also make sure discounts are not used as hidden subsidies to win new business, by requiring discounts to be published.
The chief executive of the Industry Super Network, David Whiteley, said it also would be crucial to ensure discounts were not paid for by other members' funds.
"Industry super funds will insist that where benefits of scale are derived from employers, these must be clearly demonstrated and proven," Mr Whiteley said.
The reforms are also intended to address the nation's "lost super" problem - when people pay fees on multiple funds after switching jobs.
By 2014, unused accounts holding less than $10,000 will be automatically merged with the members' active account.
Opinion
The Stronger Super reform package is nothing short of a miracle.
Annette Sampson, page 8
Frequently Asked Questions about this Article…
What is MySuper and why does it matter for everyday investors?
MySuper is a government-backed low-cost, no-frills superannuation product being introduced from July 2013. It matters because it requires all funds to offer a simplified, lower-fee option with no commissions, part of the biggest overhaul of Australia’s $1.3 trillion super industry since 1992 — aimed at cheaper, clearer default super for many workers.
How does the flexible pricing decision for MySuper affect fees and discounts?
The government allowed flexible pricing, so MySuper funds can charge different fees and offer discounts (for example to large employers) rather than being forced to use a single uniform price. The change lets retail funds offer competitive deals, while the government requires discounts to be published to protect transparency.
When will MySuper and commission-free contributions take effect?
MySuper products are being introduced from July 2013. Workers who haven’t chosen a fund will have contributions paid into a low-cost MySuper fund from October 2013. The government said by 2013 all new super contributions will be commission-free, and by 2017 the vast majority of super balances will be commission-free as default balances move to MySuper.
Will discounts offered under MySuper be transparent and fair to members?
Yes. The final rules require any discounts to be published so they can’t be hidden subsidies used to win business. Industry groups also stressed that discounts derived from economies of scale must be clearly demonstrated so other members aren’t unfairly subsidising them.
How will MySuper address the ‘lost super’ problem and small inactive accounts?
To reduce ‘lost super’ (multiple small accounts and unnecessary fees), the reforms include automatic consolidation: by 2014 unused accounts holding less than $10,000 will be automatically merged with a member’s active account.
Who supported and who opposed flexible pricing for MySuper?
Retail (for‑profit) funds lobbied strongly for flexible pricing so they could offer better deals to large employers, and industry bodies like the Financial Services Council welcomed the decision. Union-affiliated industry funds and Treasury had initially supported a single pricing point, concerned uniform fees would protect large retail players.
Who negotiated the final MySuper design and timetable?
Assistant Treasurer Bill Shorten announced the final details after last‑minute talks with industry. A months‑long working group chaired by Paul Costello, the former general manager of the Future Fund, helped negotiate the package.
What protections will everyday super members get under the MySuper reforms?
Members should benefit from lower fees, commission-free contributions and clearer pricing. The reforms also require published discounts and insist any employer-based benefits of scale be proven, all intended to increase transparency and protect members from hidden cross-subsidies.
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