Addressing the Conference of Major Superannuation Funds on Wednesday, shadow assistant treasurer Stephen Jones said the reforms – due to be debated when parliament resumes – were “deeply flawed” despite recent clarifications made by the government in the supporting regulations, and that he did not “expect an easy Passage for the bill”.
“Stapling provisions in the legislation could see 3 million workers defaulted into underperforming funds, and the directions power gives the Treasurer the extraordinary power to cancel any super investment,” Mr Jones said.
He added that while stapling members to one super fund for life had been a recommendation of the royal commission, the government’s method of going about this could see workers stuck in underperforming funds that were unsuitable for their needs.
“There are two ways stapling could be done – the first would be to staple members to their money which, with the assistance of tax file number tagging, would move the employee from one fund to another,” Mr Jones said.
“This has the advantage of ensuring insurance coverage is appropriate to the occupation of the worker – this is important for frontline medical jobs which involve higher risk than the average worker. The other method will ensure an employee is stapled to a fund for life, in most cases the first fund they join when entering the workforce.”
Mr Jones said the stapling provisions, combined with the government’s moves to close down underperforming funds, could see some workers stapled to these closed funds for life.
“The government would mandate an underperforming fund will be closed to new members and existing members will be informed – the deficiency is what happens to members who don’t shift money to another fund,” he said.
“Stapling members will leave them languishing in a fund which the government has identified as something which is certain to destroy their savings. Without a plan to actively managed members into better performing funds and ensure they aren’t stapled there for life Labor cannot support the bill.”
Mr Jones added that the directions power given to the Treasurer to “make Josh Frydenberg Australia’s super trustee in chief” would be “kryptonite for investment certainty”.
“It creates the type of risk that is usually associated with tin pot dictatorships. There is no end to the ways in which this ‘kill switch’ could be deployed in the right or wrong political circumstances,” he said.
Mr Jones said he urged the government to work constructively with Labor on amendments to the bill, but said its fate at the moment was “far from certain”.