MySuper bill 'mandates flipping', warns Colonial First State
A section of the Government's MySuper bill, as currently drafted, could actually mandate the practice of "flipping", according to Colonial First State (CFS).
In a submission lodged with the Parliamentary Joint Committee reviewing the MySuper legislation, CFS has pointed to the manner in which the Cooper Review recommendations had sought to eliminate the practice of "flipping" superannuation fund members into more expensive arrangements.
It said that while some elements of the MySuper bill ensure members are not required to be compulsorily "flipped" to a higher MySuper product fee and different insurance premium rates, section 29VB would prevent former employees from accessing the discounted administration they may have enjoyed prior to ceasing employment.
"The effect of this section is to mandate the practice of 'flipping' for these employee-members once they cease employment," the submission said.
"The discounted administration fee as negotiated between the employer and trustee can no longer be charged to the former employee, meaning the trustee must apply the standard (higher) MySuper administration fee."
The CFS submission said the section was inconsistent with other sections of the legislation and it was unclear why it had been drafted.
"We are concerned that members will be negatively impacted by this construction of the law," the submission said.
"In the absence of the ability to 'retain' former employees under their existing fee and benefit structure, the impact of flipping members to a higher fee and potentially higher insurance rates should not be underestimated."
AUTHOR
Staff Writer
Recommended for you
Financial Services Council chief executive, Blake Briggs, is urging Minister for Financial Services, Stephen Jones, to take advantage of the QAR opportunity to reduce regulatory duplication and ensure advice is affordable.
Former chair of the House of Representatives’ Standing Economics Committee, Tim Wilson, is planning a return to politics after losing his seat in the 2022 federal election.
Morningstar is going to offer research ratings of funds in the $3.5 trillion superannuation sector for the first time in response to demand from financial advisers.
Treasurer Jim Chalmers has opened a consultation into the design of the annual superannuation performance test, canvassing views on a range of reform options.
