Superannuation funds which offer their own post-retirement products such as the Government’s proposed MyRetirement offering have an inherent conflict of interest with respect to the best interest duty, according to the Financial Planning Association (FPA).
In doing so, the FPA has told the Government it has significant concerns around the Government proposing to have the MyRetirement regime based around the inclusion of safe harbour provisions for product providers.
In a submission to the Treasury dealing with the Development of the Framework for Comprehensive Income Products for Retirement (CIPRS), the FPA said superannuation fund members should be encouraged to consider their retirement goals and needs, and their financial circumstances both inside and outside super, when selecting an appropriate retirement income product, to ensure the product is appropriate and in their best interest.
“Trustees ‘offering’ their own MyRetirement product to individual members have an inherent conflict of interest in this regard,” it said. “A trustee’s fiduciary obligation applies to its members as a whole, including consideration about the sustainability and stability of the fund, which can conflict with what is in the best interest of an individual member.”
“It is extremely concerning that the MyRetirement regime is based around the inclusion of safe harbour provisions for product providers.”
The FPA submission pointed out that the best interest obligations were put in place to shift the emphasis of the motivations in the industry from a sales-based to a consumer-centric approach and culture in order to improve consumer outcomes and increase consumer protections, in response to a number of significant and catastrophic failures.
“The MyRetirement framework now proposes to offer a carve-out from the best interest obligations specifically in relation to the $2.3 trillion of Australian’s retirement savings product providers are responsible for,” the submission said.
“This best interest carve-out, accompanied by the proposal to allow product providers to ‘nudge’ consumers into MyRetirement products, undermines the purpose of the SIS Act and Corporations Act as consumer protection mechanisms.”