The Federal Government’s announcement that Tax File Numbers will become the primary identifier within the superannuation industry will be of great benefit to members of funds, according to ASFA – the Voice of Super.
“This is a move the industry has sought for a very long time,” ASFA chief executive Pauline Vamos said. “When it comes into effect on 1 July 2011, it will provide two key advantages. The industry will be able to identify members and get money into their superannuation account quickly to maximise returns.
“It will also allow trustees of funds to auto-consolidate multiple accounts within a fund. This will save people money because they will not be paying for two accounts that they don't need or want.”
ASFA consulted widely with all sectors to inform its response to the Government. “The announcements today reflect the substance of ASFA’s submission to the Government last week,” Ms Vamos said.
The announcement that MySuper will also be implemented from 2013 will provide a single investment strategy that creates a vehicle by which members can finally use to compare one fund against another.
“The government has set the industry a challenge to provide the best possible returns at the lowest cost for those people who do not wish to make an investment choice within their fund.
“We applaud the government in setting a longer lead time for MySuper that will allow the industry time to adjust and for the Productivity Commission to define the process by which it will be integrated into the industrial relations framework.
“The focus will finally be on not only returns after tax and after fees but on the value provided. It is now time for the industry to come together to create standard definitions and benchmarks for the industry.
“The government has recognised the significant strides the industry has made in developing single-issue, simple advisory services that go further than intra-fund advice and, as a result has not mandated intra-fund advice as part of MySuper.”
Ms Vamos said ASFA was pleased that the government has listened to the industry on MySuper by spelling out the objective fiduciary duties for trustees and not mandating a post-retirement product.
“Not mandating post-retirement products allows trustees to exercise their duties with enough flexibility so that they can always act in the best interest of their own members.
“The government has also accepted the Cooper Panel's recommendations to create greater objectivity around trustee duties. The vast majority of trustees already exercise their duties at this level.
“What these defined duties do is provide a floor by which APRA can regulate the industry. With the significant growth predicted for the industry and members’ accounts over the next few years, an appropriate level of regulation is welcomed and indeed necessary to ensure there is a high standard that will ensure only best practice is delivered by trustees.”
Ms Vamos said that costs will trend down as the industry achieves greater scale and the regulatory framework is set but more work is needed. The industry needs a timetable around:
- Abolition of member benefit protection, which acts as a disincentive for members with low balances to consolidate their accounts and is also very expensive for funds to administer
- CGT rollover relief should be permanent and apply to gains (not just losses), which will remove a significant impediment to funds merging
- The Successor Fund Transfer (SFT) test should be changed from ‘equivalency’ to ‘no overall disadvantage’ – this will make it easier for funds to merge and therefore achieve greater scale
- The implementation of data standards and protocols across the industry
- The implementation of an industry standard measuring investment performance on a risk basis across all portfolios.
ASFA will continue to work with all sides of politics to deliver the best of the Cooper recommendations.
The Association of Superannuation Funds of Australia (ASFA) is the peak industry body for the entire superannuation sector. It is the only industry body that represents all types of superannuation funds, service providers and fund members.
For further information, please contact:
Michelle Dunner, GM Marketing and Communications, ASFA, (0412) 704 016
Sarah O’Grady, Communications Co-ordinator, ASFA, (0410) 439 966