Nick Sherry
Superannuation funds will soon be required to introduce future member benefit forecasts and calculators, the Minister for Superannuation, Senator Nick Sherry, has announced.
“It is my intention to see universal forecasting as part of the superannuation system,” the minister told the Institute of Actuaries conference in Melbourne.
“Universal forecasting would provide an estimate, in current dollar values, of total savings to access ages for superannuation and age pension in a simple, standard format.”
The move reverses an Australian Securities and Investments Commission (ASIC) decision in the 90s to remove all calculators from financial services products.
Sherry said the calculators in use then had led to the mis-selling of financial services products, but the new regulations would be much tighter.
“You can come up with a standard formula for creating these calculators, and the Institute of Actuaries paper on this subject will be the starting point,” he said.
“The policing of these calculators will be conducted by ASIC and all superannuation funds, including retail products, will be included.”
The institute’s paper calls for assumptions on members’ projected returns to be standardised and set down in legislation.
Based on the UK model, the institute would like the assumptions to cover investment earnings, contribution increases, inflation, salary increases, cost increases and the translation of balances into pensions and annuities.
It also wants the assumptions to be set at realistic levels.
Sherry said the plan was to keep the calculators simple, with actuaries handling the projections.
“The Government Actuary would underwrite the system,” he said.
“Developing accurate forecasting and a calculator will significantly improve our (superannuation) system in a number of ways.
“It will provide an estimate of likely outcomes at critical ages, [such as] access age for superannuation and age pension, and greater focus and emphasis will be placed on the long-term rate of return and the elements that impact on it, such as contribution levels and total fees and charges.”
Sherry also spoke about improving governance of superannuation funds, especially the self-managed super fund (SMSF) sector.
“There have been a number of governance issues raised with this sector and I will make the call to deal with these without fear or favour or show any weakness,” he said.
“I do not like people flogging SMSFs.”
Sherry said he was concerned about “aggressive marketing tactics” persuading people to set up funds without knowledge of their role as trustees or the costs.
“It is important that financial advisers who recommend a SMSF provide effective disclosure,” he said.
“This will ensure people who wish to establish a SMSF are familiar with details such as the financial and time burdens, and the amount of money they will need in the fund to make it viable.”
The minister made no commitment as to when any changes to SMSF rules would be announced other than confirming he was reviewing the submissions.
