SUPERANNUATION funds owned by the big banks are notching up 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 are 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.
Reforms are also intended to deal with "lost super".
Frequently Asked Questions about this Article…
What is MySuper and when will the low-cost MySuper product be introduced?
MySuper is a government-backed no-frills superannuation product that requires funds to offer low fees and no commissions. It was scheduled to be introduced from July 2013.
Will super funds be allowed to charge different fees under MySuper?
Yes. The government agreed that MySuper funds can use flexible pricing and charge different fees, rather than being forced to offer a single uniform pricing point.
How will MySuper affect commissions and commission-free super contributions?
Under the MySuper changes, superannuation commissions are being eliminated for the new product. The government said all new super contributions would be commission-free from 2013, and by 2017 the vast majority of superannuation balances would be commission-free.
What timetable applies for moving members into MySuper default funds?
Workers who haven’t chosen a fund will have contributions paid into a low-cost MySuper fund from October 2013, and all default super balances are scheduled to be shifted to MySuper by 2017.
Will funds still be able to offer discounts to large employers under MySuper?
Yes. The Assistant Treasurer said funds would still be able to offer discounts to large employers, and retail funds had lobbied to retain that flexibility so they could give better deals to large employers.
How will the government ensure discounts and fee deals are transparent and fair?
The government will require any discounts to be published so they aren’t hidden subsidies used to win business. Regulators will also be watchful that discounts aren’t effectively paid for by other members’ funds.
Who was involved in finalising the MySuper design and how did industry groups react?
Final details were agreed after talks with industry through a working group chaired by Paul Costello, the former general manager of the Future Fund. Industry groups had mixed views: the Financial Services Council welcomed flexible pricing, while Industry Super Network warned discounts shouldn’t be paid for by other members.
What is the intended overall impact of MySuper for everyday investors?
MySuper aims to deliver a low-cost, commission-free default super option for people who haven’t chosen a fund, increase fee transparency and competition, and ensure most super balances become commission-free over time — changes intended to benefit everyday investors.
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