Treasurer’s power to overrule super investments dumped

The government will ditch a controversial measure that gave power to the Treasurer to veto super fund investments.

Treasurer Josh Frydenberg in question time on Thursday. Picture: Martin Ollman

The government has dumped a controversial measure giving power to the Treasurer to veto ­investments made by super funds in an amended Your Future, Your Super package that passed through the House of Representatives on Thursday evening.

Superannuation Minister Jane Hume said the changes did “not undermine the policy intent or ­effect of these reforms, which will see Australians better off by $17.9 billion over the next 10 years”. The legislation will now face opposition in the Senate, with Labor and industry groups flagging proposed rules that would “staple” super fund accounts to workers as they move between jobs as a key point of attack.

The bill had struggled to pass through the House of Representatives after Nationals MP Barnaby Joyce this week said he had “a real problem” with the directions power. Ex-Liberal MP Craig Kelly also flagged he was not happy.

Opposition assistant Treasury spokesman Stephen Jones said ­removing the Treasurer’s proposed ability to direct a super fund to cancel an investment represented a “significant win”. “I congratulate all members of the parliament who played a part in forcing the government to do the right thing.”

The package, which is scheduled to commence on July 1, was designed to reform the $3.1 trillion retirement system in three ways.

It would require APRA to conduct an annual performance test for MySuper products – and other funds as specified – as a way to ­address underperformance. Where a product has failed the performance test in two consecutive years, the trustee would be prohibited from accepting new beneficiaries into that product.

The package would also ­address the issue of Australians ­accruing multiple super accounts as they change jobs – at least on an ongoing basis – by “stapling” a member’s account to them as they move between employers. Mr Jones said this last component would be core to Labor’s opposition to the bill in the Senate.

“We don’t want people to be stapled to dud funds,” he said.

Challenger head of retirement income Jeremy Cooper, who led a review into the superannuation system a little over a decade ago, said the reforms were overwhelmingly positive, in particular in so far as they addressed the significant problem of multiple accounts and “put the spotlight on funds that haven’t been doing as good as job as they should”. The Your Future, Your Super package would also strengthen the language requiring the trustee of a super fund to ­ensure all expenditure is made in the best interests of members – a section which had included the controversial power allowing the Treasurer to direct a super fund to cancel an investment.

Australian Institute of Superannuation Trustees chief executive Eva Scheerlinck said it was a “relief” to see the investment veto scrapped, “but removing this provision from the bill doesn’t remove the direct and immediate threat to millions of Australians who will be stapled to underperforming and untested super products”.