The Retirement Income Covenant (RIC) draft legislation should include a clear obligation on trustees to adhere to the Corporations Act 2001 provisions on giving personal and general financial advice, the Financial Planning Association of Australia (FPA) believes.
In its submission to the RIC draft legislation, the FPA said it was concerned it did not oblige superannuation trustees to comply with the financial advice laws in the Corporations Act 2001.
It said of particular concern was in relation to the assistance the trustee would provide beneficiaries to achieve and balance the objectives of the strategy.
“While 1.52 of the explanatory memorandum [EM] states that the trustee ‘does not need to consider the specific circumstances of individual members’, superannuation trustees have access to personal information about beneficiaries,” the FPA said.
“This creates a very fine line between the provision of factual information, as suggested in 1.14 of the explanatory memorandum, and the provision of general or personal advice as the beneficiary may assume the trustee has considered the individual’s circumstances when ‘assisting’ them with their retirement income needs.”
The FPA said the obligation to comply with financial advice provisions must be included in the SIS Act as the primary legislation codifying the RIC.
“The FPA recommends the draft legislation (not the EM) be amended to include a clear obligation on trustees to adhere to the provisions in the Corporations Act 2001 relevant to personal and general financial advice when formulating, reviewing and giving effect to the retirement income strategy,” it said.
“For example, amend s52AA(2) of the draft legislation to include: In assisting beneficiaries in achieving and balancing the objectives of the strategy as required under this section, trustees must comply with the personal and general financial advice provisions of the Corporations Act 2001.”
It noted this was in line with the reference to other laws referenced in the draft legislation, rather than citing a regime in the EM.
The FPA also said the RIC should include “frailty risk” during the formulation, reviewing, and giving effect to the trustee’s retirement income strategy.