In this guide
- Consultation begins on legislating the objective of super
- Final Quality of Advice Review report released to mixed reception
- Transfer balance cap to increase
- HESTA lobbies government to improve equity in super
- AIST calls for stop to unsolicited calls about super
- Super funds to itemise expenditure on marketing and sponsorships
- ART and AvSuper look at merger
Consultation begins on legislating the objective of super
Thirty years after the introduction of compulsory superannuation, the Federal Government has started the process of legislating an objective for super. The time it has taken to get to this point is an indication of the politically-fraught nature of the undertaking.
Treasurer Jim Chalmers released a consultation paper on 20 February 2023 seeking community feedback on its proposed definition of the objective of super: “to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.”
The need for an agreed objective was highlighted during the Covid crisis when the then Coalition government allowed early access to super to help Australians experiencing financial hardship.
For its part, the current Labor government want to allow super funds to invest in nation-building projects “where there is alignment between the best interests of members and national economic priorities”.
Despite its central role in the retirement income system, the government argues there is no agreed objective of superannuation, legislated or elsewhere, to serve as a guide for policy makers, government, regulators, industry, and the wider community.
With $3.3 trillion of retirement savings at stake, generating confidence in the system for generations to come is a top priority.
The consultation paper is available on the Treasury website. Submissions close 31 March 2023.
Final Quality of Advice Review report released to mixed reception
The Albanese Government has released the Quality of Advice Review’s final report, chaired by Michelle Levy. The final report includes many of the recommendations in the interim report, including the controversial proposal to replace the ‘best interests’ duty with an obligation to provide ‘good advice’.
The Review was set up to find ways to make financial advice more accessible and affordable for everyday Australians.
The final report has been welcomed by industry associations but dismissed by many consumer groups, such as CHOICE which said it was a “recipe for another Royal Commission”.
“The radical changes that it recommends will expose consumers to unacceptable risk when obtaining financial advice from a bank or super fund,” CHOICE CEO Alan Kirkland said.
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Assistant Treasury and Minister for Financial Services Stephen Jones said when releasing the report that “anyone with an interest in financial advice should read it and make their views known.”
The Financial Services Council (FSC) said the report laid a “strong foundation to ensure many more Australians get the financial advice they need.”
“The final report recommends new consumer protections by expanding what is personal advice and creating a ‘good advice’ duty to ensure advice is ‘fit for purpose’. The move to a ‘good advice’ duty draws on the work of Commissioner Hayne’s Financial Services Royal Commission and would align the advice framework with legal protections in the Australian Consumer Law,” CEO of the Financial Services Council (FSC) Blake Briggs said.
Transfer balance cap to increase
The general transfer balance cap will increase to $1.9 million on 1 July 2023, an increase of $200,000. Anybody who starts their first retirement phase income stream on or after this date will have a transfer balance cap (TBC) of $1.9 million.
People who have already started a retirement phase pension and have not already met or exceeded their transfer balance cap will have their cap indexed. The ATO says a person’s proportional increase in their TBC is based on their highest ever balance in their transfer balance account. Their personal TBC will be between $1.6 million and $1.9 million.
The increase in the TBC follows rapid increases in inflation over the past year with the CPI rising by 7.8 per cent over the 12 months to December 2022.
HESTA lobbies government to improve equity in super
Modelling by super fund HESTA reveals that introducing key gender equity measures could boost super balances by as much as 11%.
Modelling in HESTA’s 2023–24 pre-budget submission examines the combined impact of paying super on the Commonwealth Parental Leave Pay scheme, extending eligibility for the Low Income Super Tax Offset (LISTO) to those earning up to $45,000 and bringing the offset in line with the current Superannuation Guarantee (10.5%).
The modelling found that if those key measures were introduced, mothers working in health and community service sectors could see a super boost in retirement ranging from 3.7% to more than 11% depending how many children they have.
Even if just the LISTO eligibility was extended, approximately 250,000 HESTA members could see an increase to their super savings, the modelling found.
“Every dollar our members can add to their super counts. That’s why the Federal Budget is a key opportunity to make real progress on boosting women’s financial security in retirement,” HESTA CEO Debby Blakey said.
“Our super system is one of the world’s best, but gaps remain that overwhelmingly disadvantage women and those earning lower wages.”
AIST calls for stop to unsolicited calls about super
The Australian Institute of Superannuation Trustees (AIST) is calling for anti-hawking legislation to be extended to financial services. The extension would stop unsolicited calls to consumers about advice on superannuation.
AIST is concerned the ‘cold calling’ results in consumers being charged exorbitant fees of up to $6,000 to roll from high performing, low fee profit-to-member funds into poorer-performing retail funds.
“The same imbalance of power exists in the unsolicited sale of financial services as in the unsolicited sale of financial products,” AIST CEO Eva Scheerlinck said in AIST’s pre-budget submission.
Often the calls come from an intermediary generating business for a financial planner. The consumer may be told their fund was high risk and all their money would go to the government if they died.
“A number of these cases have been reported to ASIC (the Australian Securities and Investments Commission) and while ASIC may be able to pursue the advisers for poor advice, this is a time consuming ‘whack a mole’ approach that does not address the systemic risk to customers,” Scheerlinck said.
Super funds to itemise expenditure on marketing and sponsorships
Labor’s attempt to amend a Morrison Government requirement for super funds to report itemised expenditure on donations, marketing and sponsorship expenditure has been disallowed following support for a motion by Jacqui Lambie from the Greens and independents.
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The Coalition, Independents and the Greens voted for Lambie’s motion:
That the Superannuation Industry (Supervision) Amendment (Annual Members’ Meetings Notices) Regulations 2022, made under the Superannuation Industry (Supervision) Act 1993, be disallowed [F2022L01162] – 42 votes to 21.
ART and AvSuper look at merger
The Australian Retirement Trust (ART) has entered into a Memorandum of Understanding with AvSuper to explore a potential merger.
“The two funds will now commence a comprehensive due diligence process, and any potential merger will only progress if both funds determine that doing so would be in each of their members’ best interests,” ART said in a statement.
ART has approximately $230 billion in funds under management and more than 2.2 million members across Australia.
AvSuper, a super fund for the aviation and aviation safety industry, has more than 5,300 members and $2 billion in funds under management.
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