Federal Government's Stronger Super Package

As you will know, yesterday saw the launch of the Federal Government's Stronger Super package. Due for introduction in July 2012, MySuper offers a no-frills, default method of contributing to super. While the FPA is pleased with the savings and efficiency that MySuper would deliver, we are concerned that it may potentially deliver a false sense of security to many ordinary Australians. One of the best ways for consumers to reach financial independence is through getting professional financial planning advice as early as possible.

The Stronger super package has four key areas:

1. MySuper
2. Super Stream
3. SMSFs
4. Governance

Some key highlights include:

• From 1 October 2013, employers must make contributions for employees who have not made a choice of fund to a fund that offers a MySuper product;
• MySuper products will have a single investment strategy and a standard set of fees;
• Super Funds will have the flexibility to offer employers with more than 500 employees a MySuper product tailored to the needs of the particular workplace;
• By 1 July 2017, Trustees will need to transfer the existing default balances of members to a MySuper product;
• Super funds will be required to offer life and total and permanent disability (TPD) cover on an optout basis (where available, depending on occupational and demographic factors);
• To increase confidence in the SMSF sector Auditors will become registered and standards of independence will become mandatory.  

 However there are possible consequences such as:

• MySuper may allow superannuation funds to charge indiscriminately and invisibly for their intra-fund advice. The FPA believes any fees for intra-fund advice must be transparent to fund members;
• Existing corporate superannuation schemes that already meet the low-cost and efficiency standards MySuper is supposed to achieve may be forced to close;
• Compulsory consolidation of superannuation accounts under $1,000 will be on an ‘opt-out’ requirement rather than an ‘opt-in’ - which is being required in the financial advice space. Whilst we support consolidation, there is a danger that insurance cover may be cancelled without  member consent. This would be further exacerbated if the proposal to increase this measure to apply to accounts under $10,000 from 2014 goes ahead. 

Next Steps

 Exposure draft legislation will be issued on MySuper in the next two weeks, we will analyse this along with the overall detail of the Stronger Super package.

Our key point is that we musn't lose sight of the endgame which is helping Australians to retire comfortably. Consumers need to be encouraged to take a proactive approach to planning their finances, and seeking professional financial advice is key to that.