FPA hits out at age pension by means test
The Financial Planning Association (FPA) has criticised proposals to include assets held in private trusts and private companies as part of the means test for the age pension.
The Financial Planning Association (FPA) has criticised proposals to include assets held in private trusts and private companies as part of the means test for the age pension.
Chief executive officer Michael McKenna says the proposed changes would be ret-rospective if introduced, meaning investors who have organised their financial af-fairs according to the law will be unfairly penalised.
“We believe the effect of the legislation will be that any scheme that is in place which doesn’t comply with the new legislation can be overturned,” McKenna says.
The FPA has lodged a submission to the Department of Family and Community Services (FaCS) following the release of a discussion paper late last year by FaCS minister Senator Jocelyn Newman. The discussion paper — Private Trusts & Private Companies: Maintaining the Integrity of the Means Test — includes a proposal to include all assets held by an investor in private trusts and private companies as part of the means test. Senator Newman says one of the key reasons behind the pro-posed changes is the increased use of these vehicles by financial planners.
“While it is impossible to quantify the effect of financial planners’ advice on the growth in the use of private trusts and companies, there is substantial evidence to indicate that many planners promote the use of these structures for social security purposes,” Senator Newman says.
But the FPA begs to differ. “It’s a difficult question because we don’t have precise data on it, but anecdotally, not many members use private trusts and private com-panies in this way,” McKenna says.
The FPA has accused the Government of not understanding financial planners’ fi-duciary duty to their clients. McKenna says financial planners are compelled to of-fer their clients what they want.
“There is pressure on financial planners. Clients can say ‘if you don’t do it, then I’ll go down the road and get someone else to do it,” he says.
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