19 February 2016
Speech - #2016003, 2016

In the role of: Minister for Small Business and Assistant Treasurer [21 September 2015 - 18 July 2016]

Self Managed Super Fund Association Conference
video message

Hello. I hope you are having an enjoyable conference in Adelaide. The SMSF Association – under Andrea Slattery’s leadership – does a wonderful job representing a sector with more than a million members. Some people are even calling this ‘the selfie revolution’.

It’s amazing to reflect that less than 20 years ago there were just $26 billion in assets - in so‑called ‘excluded funds’.

Today, self-managed funds are edging up to $600 billion – close to 30 per cent of all superannuation assets – and the number of funds has more than tripled to over half a million.

An interesting statistic in your 2015 yearbook tells us that 2560 new SMSFs are created every month. It is clear more people are taking the ‘selfie’ route because self-managed funds offer more control, choice and flexibility.

Those are key motivations for people planning for their retirement, who want to make sure the money they are forced to contribute is being managed in their best interests. That’s also what guides the Government’s reforms to the superannuation system: putting superannuation consumers first, and getting better retirement outcomes for Australians.

The Murray Inquiry told us that our system is good, but could be better. At around $2 trillion, our asset pool is well over 100 per cent of our GDP, and it’s projected to grow to over $9 trillion in the next 20 years. By that time, it may exceed the size of the entire banking sector.[1] So we’re talking about a system of immense value – socially as well as in dollar terms. That’s why it’s vital that it works as efficiently and effectively as it can.

The Government has asked the Productivity Commission to review all aspects of the superannuation system.

I can announce that the Treasurer and I are today releasing the Terms of Reference for the PC review’s first two stages.

Briefly, the first stage of this review is about developing criteria to assess the superannuation system’s efficiency and competitiveness. The second stage is about developing alternative models for allocating default fund members to products. The final stage, informed by the first two, will look at the efficiency and competitiveness of the entire system, once the MySuper reforms have been fully implemented – sometime after 1 July 2017.

It’s important to note here that the PC review will be of the entire system, not only default funds. So this review is very relevant to SMSFs, a sector growing in importance within the superannuation system as a whole.

I also want to stress that there won’t be a moratorium on the Government proceeding with superannuation reform while the review is going on. This review is not about delaying change. It’s about making sure the system is dynamic and fit for purpose in the modern world.

We’ve already begun to make changes to the governance of the system. We want the best people safeguarding Australians’ retirement savings. And that’s why we’ve introduced legislation (currently before the Senate) to require a minimum one third of directors on superannuation boards to be independent, including an independent chair. Independent board members not only bring different skills and expertise, they add accountability. This means people can have confidence in the skill and integrity of those managing their funds.

The Government is also looking at ways to help those who have taken time out of the workforce – perhaps to raise a family or to care for a loved one – to build their superannuation balances. I note that in the SMSF sector, on average, women’s balances are 77 per cent of men’s. This is a gap that we will need to work harder to close, especially as women on average live longer than men, so they will need their superannuation savings to last longer.

Another move that will improve confidence in the industry is the change we’re making to education standards for financial advisers. We are in the final stages of developing legislation for new standards designed to formally professionalise the industry, so that Australians will be more likely to seek – and to find – sound financial advice.

As you would know, from 1 July this year, accountants providing financial advice, including on SMSFs, will need to hold (or operate under) an Australian Financial Services licence. This will provide a level playing field between accountants and financial planners giving SMSF advice.

Finally, I want to reiterate how valuable your contribution is to the superannuation sector, and to our discussions about how to improve it. You’ve got a lot to offer as we look to build the right framework for a 21st century superannuation system that Australians can trust to serve their interests. I look forward to working with you to make sure we get this right.

Thank you, and I trust you will enjoy your conference.

[1] Industry Super Australia 2014, First round submission to the Financial System Inquiry, page 117