There can be no doubt that superannuation and retirement products are a keen focus of the Interim Report.
In our submission we address certain key issues that the Inquiry has sought input on, including:
- the effectiveness of the MySuper regime and proposals for change to the regulatory settings for fees in the default superannuation market;
- competition under the MySuper regime;
- three day portability rule and illiquidity exceptions;
- tailoring asset allocation;
- calculators and benefit projections;
- the ongoing appropriateness of trust structures;
- stability of superannuation policy; and
- retirement income product development.
We agree with the preposition that superannuation policy settings lack stability - the constant change has added to the costs of the superannuation system. In our view, there should be no proposals made by the FSI that any wholesale changes be made to the existing regulatory settings. Any such review of the system should be set at a time when a sufficient period will have elapsed to assess the effectiveness of the present system.
However, we think that there are certain areas where reforms could be implemented to enhance the system’s effectiveness. These include changes:
- to the illiquidity exceptions in the portability rules, which should be relaxed to permit a period longer than the maximum timeframe in relation to that portion of member’s benefits invested in frozen funds or which cannot be priced without the need for APRA approval or member consent;
- to facilitate investment in less liquid underlying assets (for example, infrastructure), the conditions under which a longer than standard portability regime can be applied should be relaxed to allow disclosure as an alternative to prior written consent; and
- to facilitate the increased use of retirement income projections by superannuation fund trustees, the law should be amended to clarify that a calculator or benefit projection does not comprise personal financial product advice unless its output includes an express recommendation to acquire or deal in a financial product.
We also believe that the trust structure continues to be best placed to meet the needs of members in a cost effective manner, although any impediments to the use of alternative legal structures should be removed.
Policies should be pursued to encourage the development of retirement income products to offer retirees greater choice in securing an income in the retirement phase.