The peak body for the superannuation industry says that intra-fund advice should be widened to cover the transition to retirement.
In its submission to the Senate economics references committee inquiry on improving consumer experiences, choice, and outcomes in Australia’s retirement system, the Association of Superannuation Funds of Australia (ASFA) said that expanding intra-fund advice is in line with the role of the trustee to “provide their members with guidance and support in making informed choices about their retirement”.
“One element of this is trustees being able to give personalised, targeted advice to members with respect to their options and choices in retirement. If a fund does not have an Australian Financial Services Licence (AFSL) to provide personal financial advice or is not in a position to perform a full ‘fact-find’ on the member and document the facts and advice in a statement of advice,” ASFA said in its submission.
“Given this, the government’s response to the Quality of Advice Review will be instrumental in facilitating trustees’ ability to assist their member in transitioning to retirement.”
One way to do this, it said, is through allowing super funds to provide their members with more advice as they transition to retirement.
“Intra-fund advice is less costly to deliver and can prove effective in enhancing members’ outcomes,” ASFA said.
“ASFA recommends that intra-fund advice should be expanded to cover transition to retirement, including the fund’s retirement income products and age pension entitlements.”
The submission also argued that the current regulatory regime around the provision of personal financial advice acts as a “material impediment to the uptake of retirement income stream products”.
“Trustees’ ability to provide guidance to members, including a personalised or targeted ‘nudge’, has been constrained by regulatory prohibitions and requirements with respect to the provision of financial advice,” ASFA said.
When announcing the final tranche of proposed changes on the back of the QAR, Financial Services Minister Stephen Jones addressed this need for super funds to be able to “nudge” members.
“It is difficult for funds to engage their members at scale in a meaningful way under the current rules,” Jones said in December.
“But we want to lift engagement. So, we will create a specific permission within the current general advice framework to allow superannuation funds to prompt or ‘nudge’ members.
“This will allow funds to be proactive and encourage members to think about their financial situation. And to seek advice at important decision points that they might otherwise have missed.”
In its submission, ASFA noted the role this legislation will play in enabling greater communication between super funds and their members, but said there are other impediments that need to be cleared up.
“Reforms to the regulation of the provision of financial advice, in response to the Quality of Advice Review, should see improvements in the ability of trustees to provide advice about, and to recommend, income stream products,” it said.
“The pension standards in the Superannuation Industry (Supervision) Regulations 1994 can act as an impediment to income stream product innovation. Further, the regulatory standards for the retention of capital/reserving required for some income streams with a longevity or market risk component can also act as an impediment.
“ASIC’s regulatory relief is needed for superannuation calculators and retirement estimates provided to those already in retirement and with respect to specific, as opposed to generic, products.”
