CFS backs quick turnaround times for super rollovers
Quick turn-around times for super rollovers should not be a problem on a day-to-day basis and should be a fundamental goal of the superannuation system in Australia, general manager products and investment at Colonial First State Peter Chun said.
The comments come as super funds express concern over coping with regulation after the Australian Prudential Regulation Authority's (APRA's) draft prudential standards for superannuation funds made it a statutory obligation from 1 January, 2014 to meet the three-day turn-around for member transfers.
The Association of Superannuation Funds of Australia (ASFA) said last year superannuation funds should not be forced to process rollovers within three working days but should act as quickly as possible within 30 days.
Chun said he can see some funds may have difficulty meeting a three-day turnaround, especially during the end of the financial year when activities such as final valuations, distribution, capital gains tax calculations and external audits can delay the release of unit prices.
But this should not be an obstacle on a day-to-day basis, he said.
ASFA also argued the three working day rule for rollovers failed to appreciate existing and long-standing arrangements for forward unit pricing and would lead the industry to adapt costly daily unit pricing processes, which could lead to short-termism in investment decisions.
But Chun said recommending using a financial adviser, providing more educational material and increasing financial literacy among members were better ways for funds to help members make good investment choices instead of delaying the release of account information.
"Higher engagement, transparency and transactional efficiency don't necessarily amount to short-termism. These are a direct response to increasing customer demands," he said.
"While forward pricing can add a day to the rollover process compared to the use of historical pricing, many funds are already able to receive a rollover request on T, price it on T+1, and then remit the funds to another fund on T+1 or T+2, all within the three-day turnaround, on a normal, day to day basis.
"Real-time banking products are letting members see the effects of transactions on their traditional banking accounts immediately, and members may come to expect the same level of service and efficiency for their super," Chun said.
He said the introduction of SuperStream and the use of electronic transfers should make the three-day turnaround easier to meet, as the need for paper instructions and cheques for payment will reduce.
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