Superannuation funds should be permitted to provide members with estimated projections of the future value of retirement savings in line with overseas practises, according to the Association of SuperannuationFunds of Australia (ASFA).
Projected benefits are provided to superannuation fund members in Sweden and the United Kingdom, while Australia has been criticised in a recent OECD report for its “general lack of information about the size of future superannuation entitlements”, ASFA has told the Government in a new submission.
In Australia the Australian Securities and Investments Commission (ASIC) places heavy restrictions on the use of projections by super funds.
“At the moment people have no idea of what that savings pattern will get them, or even the fact that they’re going to have to save a lot more later on,” ASFA director of policy and research Michaela Anderson said.
The call comes amidst controversy surrounding the inclusion of projected benefit estimates in industry super fund television advertisements.
Last week, Chant West principal Warren Chant suggested the “net benefit to members” figures contained in the commercials might be misleading.
Industry Fund Services chair Garry Weaven responded by questioning the Chant West analysis and claiming it “appears to be deliberately misleading and accordingly will be referred to ASIC”.
But Anderson stressed the controversy could be avoided with appropriate regulation if a move to allow projected fund values was adopted.
“Whenever you do any projections, they are estimates. They’re not hard and fast and that’s why it’s so important that you have standardised assumptions right across the industry. Someone has to be the ruler on those, so that people aren’t doing it individually, if you’re going to help people look at their savings patterns.”
She said providing members with estimates of future benefits would stimulate young people’s interest in saving by informing them of what they could expect to receive at retirement based on their current savings patterns.
“It’s a reality test for the savings pattern you have now,” she said.
