The chairman of the Australian Securities and Investments Commission (ASIC), Jeff Lucy last month used a speech to the Committee for the Economic Development of Australia to outline the regulator’s approach to the new choice of superannuation regime.
The following represents the text of that part of his speech relating to choice of fund:
“Let me now turn to discuss a specific area in which ASIC has, along with the ATO, Treasury and APRA, a major and immediate regulatory role — the implementation of the super choice legislation.
“As you would all know, this new legislation ensures that, for the first time, many Australian workers will be able to decide who manages their hard earned retirement savings. Employees will be able to switch funds, thereby exercising their own buying power and choosing the super fund that best suits their needs.
“Of course, employees already have a choice of fund in relation to their non-compulsory contributions.
“There are some in the media who have been getting a little worked-up about the impending introduction of super choice. The fact is, however, that there is no urgency for consumers to make hasty decisions about their retirement savings. There is no decision ‘time bomb’ waiting to go off on July 1. People can take their time.
“In the meantime, ASIC is working on ensuring that both consumer and industry confidence is maintained by:
* demanding appropriate standards of advisers and fund managers; and
* helping consumers make informed decisions.
“ASIC expects that industry will act responsibly and we are actively policing the marketplace to identify, weed out and deter any isolated bad practices we find that might be inappropriate.
“We will see that consumers are provided with appropriate disclosures about the implications of changing or switching super funds. Financial advisers generally need to find out about their clients’ current superannuation arrangements and to consider any potential lost benefits or transfer costs before recommending a change.
“We are monitoring financial services providers and we will take action if they fail to meet their significant obligations under the law.
“These obligations include the need to provide good professional advice supported by appropriate documentation. However, where there are new provisions and if people are making a genuine attempt to comply, we will be balanced in our approach.
“Where the provisions are not new, where the legislature has deliberately imposed strict liability, or where people are disregarding the law, we will adopt our usual strong approach to enforcement.
“Not providing a Statement of Advice (SOA) is clearly in the latter category. SOAs are a primary consumer protection tool under the Financial Services Reform Act and all the more relevant where switching of super is concerned because of the long-term implications of a switching decision and the important provisions covering the costs and benefits of switching someone’s retirement savings.”
