BT Financial Group (BTFG), Colonial First State (CFS) and Bendigo Wealth have aired concerns regarding the government’s proposed introduction of a low-cost superannuation product, MySuper.
In its submission to the Parliamentary Joint Committee (PJC), BTFG head of government and industry affairs Alyson Clarke raised a number of issues, with involvement of the Australian Prudential Regulation Authority (APRA) in approving all MySuper product offerings a key concern.
“We do not support APRA having an obligation to actively approve all tailored or separately branded MySuper product offerings,” Clarke said.
“Involvement in commercial arrangements entered into by superannuation funds with employers would be costly, time consuming and inefficient for the industry.”
Clarke, on behalf of BTFG, also took issue with APRA being given up to 180 days to approve a tailored MySuper offering.
Such a step would result in significant delay, create uncertainty for employers who have commercially negotiated an arrangement for their employees, and lead to reduced competition within the superannuation industry, Clarke said.
“APRA’s role should be to monitor compliance with MySuper legislation through annual reporting and ongoing supervisory activities, as envisaged in the Stronger Super information pack,” she said.
The proposal for trustees to wind up existing brands as a result of MySuper was another key concern for BTFG.
“Organisations that have made significant investments into building trusted brands through consistent services and benefit delivery should not be faced with a regulatory change that will effectively destroy the value of these brands,” Clarke said.
“We recommend that the bill be amended so that trustees can continue to offer multiple branded products that will meet the new MySuper requirements without the need to provide evidence to APRA that there is ‘material goodwill’ in an existing brand. Funds would still have an annual reporting obligation to disclose to APRA the details of all MySuper products, so that APRA can continue its prudential supervision of the industry.”
CFS chief executive Brian Bissaker also raised a number of issues.
“CFS supports the government’s Stronger Super reforms and is concerned to ensure the legislation to introduce MySuper is efficient and does not result in unintended consequences,” Bissaker said.
“Our concern is that the proposed legislation requires employees to pay higher fees once they cease employment with their employer, even where they remain in the same plan.
“The legislation appears to mandate the practice of ‘flipping’ in these circumstances.”
Bendigo Wealth executive Paul Rohan highlighted the amendment of modern awards in relation to default superannuation funds, the fee structure of lifecycle investment strategy, intra-fund advice, and the consideration of plan scale as the key concerns for his group.
“We believe that the current restrictions on allowable default funds for employees captured under modern awards impacts our ability to service our customers, including business customers, in a holistic manner,” Rohan said.
“We recommend that this issue be addressed prior to the commencement of MySuper products on 1 July 2013.”
In regards to intra-fund advice, Rohan said it was the group’s belief that the advice model is challenged under the MySuper fee model.
“We believe that the description of intra-fund advice needs to be clearly articulated in future tranches of legislation to ensure that it is a service that a member is likely to use,” he said.
“We propose that a separate fee mechanism should be established to allow organisations with differing advice propositions to continue tailoring their solutions.”
