6 Overlap with regulators and other parts of government
Overlap of the Council and regulators
The terms of reference directed the Charter Group to consider the potential for overlap with the work of regulators. The Charter Group has taken this to refer to the policy work of APRA, ASIC and the ATO. It has also considered the role played by CAMAC. Each of these organisations has the power to make policy recommendations to government that could potentially affect superannuation.
As for purely regulatory matters, the Charter Group is satisfied that it could be made amply clear in the legislation creating the Council that it was only able to make reports to Parliament, which would include a certificate of compatibility with the Charter principles, and had no regulatory power or function whatsoever.
Australian Prudential Regulation Authority
APRA, as the prudential regulator for superannuation, is responsible for establishing and enforcing prudential standards and practices designed to ensure that, under all reasonable circumstances, financial promises made by institutions APRA supervises are met within a stable, efficient and competitive financial system. The Superannuation Industry (Supervision) Act 1993 imposes stringent duties on trustees to manage the assets of super funds prudently and in the best interests of all the members of the fund.
Subsection 10(2) of the Australian Prudential Regulation Authority Act 1998 says:
(2) APRA must advise the Minister, if requested by the Minister, and may advise the Minister on its own initiative, respecting:
(a) matters that would improve the financial safety and efficiency, competition, contestability or competitive neutrality of the sectors in which the bodies regulated by APRA operate; or
(b) changes to, or in relation to, any prudential regulation framework law that APRA considers would overcome or assist in overcoming problems APRA has identified in the course of performing or exercising any of its functions and powers.
Council research and publication of statistics
The discussion paper envisaged that the Council would have a research function. As a general proposition, superannuation is under-researched for such a large and complex system involving so many elements, so much capital and around 11.6 million Australians. However, the Council should, when carrying out research, avoid unnecessary overlap with research conducted by other bodies on superannuation.
APRA carries out research using the data that it collects under the
Financial Sector (Collection of Data) Act 2001. The proposal to establish a Council should definitely not create even subtle signals or incentives for APRA to withdraw from its unique and constructive work in this area. APRA’s 2012 report on the effect of fund size on the performance of Australian superannuation funds is one example of this sort of work.36
The challenge would be to ensure that the research activities of the two bodies did not overlap. A memorandum of understanding between the two bodies could outline the need to communicate and resolve any potential for overlap. The memorandum could also outline the types of research each body will be likely to conduct. The scope and range of research activities that they undertake should be quite different, given the different mandates involved. For example, it has been put to the Charter Group that there are some questions relating to superannuation and retirement savings that will be more difficult for governments to examine than others. These include:
- Should the lump sum regime be restricted so that there is a cap on drawdowns like in the United States?
- Should the family home be completely exempt from the Age Pension means tests?
- Should there be a more flexible system of lifetime caps to concessional contributions than the current annual limits?
- Should people be able to defer paying off their mortgage while working as part of a deliberate strategy of paying it off with their superannuation?
There is no suggestion that APRA would conduct research into those sorts of questions. Nor is it suggested that the Council would necessarily look at those questions either, but these examples highlight the difference between the ambit of issues able to be reviewed by a prudential regulator like APRA and a body like the Council.
Australian Securities and Investments Commission
ASIC is principally responsible for the administration of the Corporations Act 2001, which regulates the conduct and disclosure obligations of financial services providers. As the conduct and disclosure regulator, ASIC’s role in superannuation primarily concerns the relationship between trustees and individual consumers. ASIC aims to look after consumers ensuring they receive proper disclosure, are dealt with fairly by qualified people, continue to receive useful information about their investment or product and can access proper complaints-handling procedures.
Paragraph 11(2)(b) and subsections 11(3) and 12A(5) of the Australian Securities and Investments Commission Act 2001 give ASIC the power to make recommendations for improvements and changes to certain laws that could impact superannuation. Such recommendations are made from time to time in the course of ASIC’s normal activities and are not published or tabled in Parliament, but any resulting law change would go through the normal legislative process. ASIC’s regulatory, as opposed to policy-formation, functions would not be affected by the existence of the Council.
The Charter Group therefore believes that there is nothing that needs to be done in relation to ASIC in order for the Council to be formed.
Corporations and Markets Advisory Committee
Under subsection 148(1) of the Australian Securities and Investments Commission Act 2001, CAMAC has the power to act on its own initiative to make recommendations to the Treasurer about changes to corporate law or matters connected to the financial services industry (among other things). Typically, CAMAC responds to requests from the Minister, but it does act on its own initiative from time to time. It is therefore possible that CAMAC might make a recommendation that is in some way related to superannuation, but it would be unlikely to be a high priority for CAMAC once the Council is in existence.
The Charter Group therefore believes that there is nothing that needs to be done in relation to CAMAC in order for the Council to be formed.
Overlap between the Council and other bodies
The Government announced the formation of the Superannuation Roundtable on 29 January 2012 to consider ideas raised at the Tax Forum for providing Australians with more options in retirement and improving certain super concessions.
The roundtable brings together representatives of the super industry, small business, employees and the community sector, as well as technical experts and academics.
The roundtable has been examining proposals to expand options in the drawdown phase, like annuities and deferred annuities, as well as appropriate offsetting savings.
Some submissions mentioned the need for the work of the roundtable to be absorbed into the Council. The Charter Group is keen to avoid duplication, but as the roundtable is only an informal advisory group, its future is very much a matter for the government of the day and the Charter Group does not have a strong view either way. Obviously, the more roles the Council is given, the more resources it will need.
SuperStream Advisory Council
The purpose of the SuperStream Advisory Council is to provide advice to Government on the implementation of the SuperStream reforms with a core focus on industry readiness for the commencement of the superannuation data and payment standards. The Council monitors the success of the standards and recommends refinements and improvements to the standards where appropriate.
Some submissions mentioned the possibility of the Council managing the SuperStream Advisory Council. The Charter Group does not agree with these suggestions. They are very different functions and should not be combined. In any case, the role of the SuperStream Advisory Council is finite — its role will not be ongoing. The Charter Group came to the same conclusion in relation to submissions that suggested that the Council should administer CAMAC.37 The functions are simply too different.
The proposed Superannuation Consumer Centre
The Charter Group sees the work of the Council as being ‘systemic’. When it reviews proposals for compliance with the Charter, it will be having regard to the core objectives of superannuation and the Charter principles and never individual cases. As the Charter Group understands the work proposed to be carried out by the Superannuation Consumer Centre, it would be focusing on the experiences and interactions of members with their superannuation: ‘a bricks and mortar’ service for consumers, effectively helping them with their super, providing information and warnings where appropriate.38 There does not appear to be much scope for overlap between these two bodies, but it has to be said that both are only at ‘concept’ stage and so the potential for overlap would have to be monitored during their respective development phases.
Superannuation Complaints Tribunal
The Charter Group does not envisage any overlap between the work of the Council and the Superannuation Complaints Tribunal.
Parliamentary committees investigate specific matters of policy or government administration or performance. A given committee could potentially overlap with the work of the Council. For instance, in April 2013, a range of industry associations made submissions to a Parliamentary Committee regarding the consolidation of superannuation accounts and the accessibility of the co-contributions scheme. The government will need to bear the Council in mind when establishing committees in the future. Also, Parliamentary committees are an inherent part of the political process. The work of the Council will be independent of the government of the day.
Ad hoc policy reviews
Governments from time to time will also establish ad hoc reviews on policy issues by a group of experts such as the Harmer pension review and Henry review.39 One submission questioned whether these would be more economical than setting up a standing Council.40 Ad hoc policy reviews have been very effective over the years, but they suffer from the defect that a lot time and effort is spent setting up infrastructure, systems and processes that are taken for granted by standing bodies such as the Productivity Commission. Subject to reviewing the effectiveness of the Council after five years, the Charter Group believes that a standing Council would be more effective than ad hoc reviews.
Lastly, the Charter Group infers that part of the philosophy of the Council is that a body of knowledge is built up that benefits the superannuation system and retirement income policy more generally, that would not be possible by conducting a series of ad hoc policy reviews.
Parliamentary Budget Office
The Parliamentary Budget Office (PBO) is one of four parliamentary departments supporting the Parliament. As a newly established parliamentary department, the role of the PBO is to inform the Parliament by providing independent and non-partisan analysis of the budget cycle, fiscal policy and the financial implications of proposals.
As part of its responsibilities, the PBO is able to provide policy costings, to prepare responses to Members and Senators relating to the budget, to conduct research on the budget and to prepare submissions for Parliamentary committees.
There might be some use in the Council and the PBO having a form of explicit cooperation, potentially recognised in the Charter. Indeed, as part of its considerations of government policy, the Council could potentially request independent costings or advice on the fiscal outlook from the PBO.
A number of submissions mentioned the need for the Council to be independent from government. Likewise, independence was a key part of the proposal for the Council, announced by the Government on 9 May 2013. The discussion paper made it clear, however, that:
… the Council would not replace the Treasury as having primary responsibility for advising Government on superannuation, taxation, regulation and prudential policy
The question arises: what would be the Council’s relationship with Treasury?
Treasury would still give policy advice to government, as it does now, but in the knowledge that policy proposals might form part of a later, separate review by the Council when the Council conducts a review of a piece of legislation. It is likely that Treasury would advise government on compatibility with the Charter principles.
It is also likely that, in all scenarios, Treasury would have a central role in relation to the Council and the Council would be informed by the IGR, the RIMGROUP models and a range of other policy activities that Treasury carries out. However, the vital distinction is that the Council would be independent from government and would be able to conduct research, publish statistics and form its own conclusions about Treasury’s assumptions, models and conclusions with a relatively modest application of resources.
Office of Best Practice Regulation
The Office of Best Practice Regulation (OBPR) promotes the Government’s objective of improving the effectiveness and efficiency of regulation. It plays a central role in assisting government departments and agencies to meet the Government’s requirements for best practice regulatory impact analysis and in monitoring and reporting on their performance.
The OBPR assesses whether a Regulation Impact Statement is required when regulations are proposed. A statement is required for all proposals that are expected to have an impact — whether positive or negative — on businesses or not-for-profit organisations.
As superannuation proposals can have an impact on businesses and not-for-profit organisations, there could be scenarios when proposals create opportunities for analysis by both the OBPR and the Council. The distinct roles of the two bodies and any conflict of responsibilities could be outlined in the legislation establishing the Council or a subsequent memorandum of understanding.
Australian Law Reform Commission
The Australian Law Reform Commission (ALRC) is part of the Attorney-General’s portfolio, while being independent of government. It conducts inquiries—also known as references—into areas of law at the request of the Attorney-General. The ALRC then makes recommendations to government on law reform. Any potential conflict of responsibilities between the ALRC and the Council on a given issue will need to be managed either in the legislation creating the Council, by government (which will create the bulk of the work of the Council by referring proposed changes to it) or potentially between the two organisations, via a memorandum of understanding.
Impacts on the Charter principles
The Charter Group considers that the above bodies could potentially make recommendations to government in relation to matters that would impinge on the Charter principles.
It would be open to the Council and these other bodies to develop memoranda of understanding to establish communication channels and other mechanisms to deal with areas of potential overlap in their activities. For example, the Council might wish to develop an agreement with the Treasury in relation to material relevant to its research and publication of statistics and reports.
Should the Council identify an issue after the fact it would be able to raise it in its annual report at the latest.
36 Australian Prudential Regulation Authority, Working paper: Effect of fund size on the performance of Australian superannuation funds March 2012. < http://www.apra.gov.au/AboutAPRA/Documents/SA_WP_EFSP_032012_ex.pdf >.
37 For example, the Association of Independent Retirees (A.I.R.) Limited.
38 Bill Shorten MP Establishment of a Superannuation Consumer Centre media release October 2012. < http://ministers.treasury.gov.au/DisplayDocs.aspx?doc=pressreleases/2012/070.htm
&pageID=003&min=brs&Year=&DocType= >, Choice, Choice welcomes government funding for Superannuation Centre 2012. < http://www.choice.com.au/media-and-news/media-releases/2012-media-releases/choice-welcomes-government-funding-for-superannuation-centre.aspx > .
39 Henry review <
http://www.taxreview.treasury.gov.au/Content/Content.aspx?doc=html/home.htm >, Harmer pension review <
40 SMSFOA submission p. 4.
Appendix A: Super Charter
5 The Charter and Council