POWERED BY MOMENTUM MEDIA
(August-2004) Will choice of funds make exit feasible?
Less than a fortnight after the Government succeeded in gaining Australian Democrats support for the passage of its superannuation choice of funds regime, concerns have emerged over the level of exit fees confronting superannuation fund members.
The Government in early July found itself confronted by headlines in major daily newspapers detailing precisely how much superannuation fund members would have to pay to exit their existing funds, something which prompted the Treasurer, Peter Costello, to signal his concern.
His concern was no doubt a reaction to the claims of the Federal Opposition that, in Government, it would act to waive exit fees.
Confronted by questioning on the issue, Costello made clear the Government did not want excessive exit fees acting as a significant impediment to the implementation of the choice of funds regime.
“I think there should be the ability to move your superannuation savings with the minimal cost and complexity available,” he says.
“The whole reason why we want freedom of choice is so that people who are getting a bad return can move their superannuation to a fund which will give them a better return and if there are large exit fees, that ease of entry and ease of exit, that competitive market, will be frustrated,” Costello says.
He adds that he will be seeking to have some discussions with superannuation funds and thoroughly recommending that as a measure of competitive discipline, exit fees should be made as low as possible.
The Opposition’s retirement incomes spokesman, Senator Nick Sherry, says the exit fees are anti-competitive and he is urging the Investment and Financial Services Association (IFSA) and Financial Planning Association (FPA) to come up with a solution.
“As a matter of urgency, IFSA and the FPA should consult with their members and agree on a policy to allow consumers choice to move their superannuation savings from July 1 next year,” he says. “A Latham Labor Government would provide legislative backing in removing existing exit fees, but only if the industry provides a legal solution to a problem of their own making.”
Commenting on the evolving debate, the chief executive of IFSA, Richard Gilbert, warns against over-simplifying the issue, particularly where long-term arrangements are concerned.
He says many of the contracts contain arrangements that are highly beneficial to members and should be allowed to stand.
AUTHOR
Mike Taylor
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