Rice Warner has warned that the Coalition’s election doesn’t mean the superannuation industry will see a period of policy stability, despite the Morrison Government’s promise not to make any changes to superannuation in the upcoming Parliamentary term.
In addition to the industry still needing to deal with the Protecting Your Super reforms and the enhanced requirements of the Australian Prudential Regulation Authority’s (APRA’s) Member Outcomes regime, the Government is yet to implement most of the Banking Royal Commission’s recommendations. On top of that, there are still policy areas in need of reform.
Support for people approaching retirement, for example, needed immediate attention, Rice Warner believed: “Engagement and financial advice for these members is variable and sporadic. Many funds would struggle to pass a sound Member Outcomes test in this area.”
Despite super fund members needing guidance as they approach retirement, Rice Warner said the existing advice system was flawed despite multiple inquiries into the superannuation sector.
“The existing system is flawed with two major problems. The financial advice laws (reinforced by commentary from the Royal Commissioner) assume a financial adviser is independent only if they are not commercially linked to a product provider,” Rice Warner said. “However, members need strategic advice even if they are content to use the building blocks of their current fund (or product provider).”
The second problem identified by the company was the lack of a default produce for retirement, meaning all members entering retirement had to sign up for a new Choice option.
Rice Warner said that while the industry may not want change, the establishment of default retirement products and a simplified financial advice regime were needed regardless of who won Government, so it would be prudent to start preparing for reform now.