Federal Government Response to the Cooper Review

On 16 December 2010, the Federal Government provided its response to the recommendations of the Super System (Cooper) Review.

Previously the Cooper Review released on the 5 July 2010 had found that fees in superannuation are generally too high, that choice had not reduced cost and that  there is too much tinkering in superannuation.  The Cooper Review made a number of recommendations to the Federal Government to improve Australia's superannuation system.   

The Federal Government response to the Cooper Review was delivered by the Assistant Treasurer, Mr Bill Shorten.  The Federal Government's response in the form of the "Stronger Super Package" provides for the introduction of a number (but not all) of the Cooper Review recommendations. 

Mr Shorten noted that "The Government is acting to reduce the unnecessary fees and charges on working Australians' retirement savings, and to remove barriers to a low cost and efficient superannuation system."  In addition, Mr Shorten indicated that projected savings in fees from adoption of the Cooper Review recommendations has the potential to save $2.7 billion in fees annually.

The Federal Government's "Stronger Super Package" includes the following reforms: 

• The introduction of a simple default superannuation product called MySuper from July 2013
  
  To take account of the 80% of Australians who do not make an active selection of a superannuation und or option, employers will be required to offer their employees a product that complies with MySuper standards.  MySuper is designed for those employees who do not make a choice about their superannuation or for those that wish to use such a product.  It will not be compulsory for an employee to use a MySuper  product.  
  
  Products that comply with these standards will be basic no frills products designed to have low fees, a single diversified investment option, no commissions, simple insurance coverage, access to basic financial advice and electronic communications to members.
  
  The Federal Government has indicated that Defined Benefits, such as those run by ESSSuper for emergency services and public sector employees, will not be impacted by the introduction of MySuper.
  
  
• The introduction of Superstream from July 2015
  
  To ensure that costs can be kept to a minimum there are a number of recommendations regarding the use of tax file numbers to identify superannuation contributions and transfers, as well as the use of technology to streamline administration.
  
  
• Improved regulation of Self Managed Superannuation Funds (SMSFs)
  
  SMSFs will be better regulated through broader Australian Taxation Office (ATO) powers, will have to pay extra levies and there will be greater knowledge and competency requirements on advisers.
  
  
• Increased powers for the prudential regulator - APRA (Please note: ESSSuper is not regulated by APRA)
  
  Aimed at making superannuation more robust with the prudential regulator APRA given more powers and funding to make Prudential Standards that are binding on the industry. In addition, introduction of a risk based system that will apply to all APRA regulated super funds for holding financial resources against operational risk.

The Federal Government has indicated that it will  undertake further consultation with stakeholders on the implementation of its reforms. Further information is available from the Stronger Super website.

More detail is needed before ESSSuper can determine the impact  on its members  of the Government's response.  ESSSuper will continue to monitor the reforms and provide further information to its members via the website as more  detail comes  to light. 

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