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AIST has stepped up its advocacy and consultations with key stakeholder groups regarding the Putting Members Interests First Bill which is now in front of the Senate Economics Legislation Committee, having been reintroduced to Parliament last week.
With the Senate Committee having now met, the date for the next round of submissions on the Bill – which will remove opt-out insurance for new members under 25 and all those with balances under $6,000 - has been brought forward to next Monday, 15 July 2019. The Committee is to report by July 23, potentially giving Government time to deal with the Bill in the July sittings in line with the proposed 1 October start date.
The Bill contains no mechanism for funds to continue to offer default insurance cover to young members or those with balances under $6,000 who may need it, including those working in hazardous occupations.
The October state date is unworkable for the industry and could threaten consumer confidence in superannuation, given that many members are still coming to grips with the 1 July Protecting Your Super changes which also involved insurance changes.
There are significant issues from the implementation of the first tranche of the July 1 reforms including:
If the Putting Members’ Interest Bill commences on 1 October 2019 as proposed, funds will need to write to members with a balance of less than $6,000 by 1 August at the latest – this is an even shorter timeframe than for Protecting Your Super Bill. The industry and the Australian Tax Office are now preparing for the first sweep of inactive accounts to the ATO which will occur by 31 October 2019 and auto-consolidation with members’ active accounts which will occur from 7 November.
AIST is advocating for an extended timeline to implement the Bill. We also continue to advocate for the Bill to be amended so that:
For further updates on AIST’s advocacy on this Bill, please contact AIST’s head of advocacy, Ailsa Goodwin at email@example.com
AIST has reiterated its call for a review of the Age Pension Asset test in response to claims from the Grattan Institute that the super system is not working for Middle Australia.
In research formally released today, the Grattan Institute argues that the compulsory super rate should not rise to 12 per cent, given that many retirees who save more in super reduce their age pension entitlements.
Responding to the research in the Australian Financial Review, AIST’s head of advocacy, Ailsa Goodwin said Grattan had it wrong in that it was the Age Pension asset test - not the super system nor the 12 per cent Super Guarantee timetable - that was flawed.
AIST noted that adjusting the taper was critical to improving fairness in superannuation and ensuring that super system provided Australians with the appropriate savings incentives.
Meanwhile, actuarial firm Rice Warner has accused the Grattan Institute of an “obfuscation of the facts,” over its claims that increasing the Super Guarantee would be detrimental to Australia.
Rice Warner says its own research shows that increasing the SG to 12% - if appropriately targeted - will be beneficial for Australia in many ways. This includes:
Annual data has revealed the gap between profit-to-member and retail fund satisfaction has grown over the last 12 months with profit-to-member funds extending their average satisfaction rating by 4.2 per cent.
The Satisfaction with Financial Performance of Superannuation in Australia report by Roy Morgan analysed customer satisfaction in financial performance and revealed that at May 2019, profit-to-member funds had a satisfaction score of 62.5 per cent, with retail funds’ scoring 56.5 per cent.
The 6 per cent point lead held by P2M funds is an increase on the 1.8 per cent point lead they held 12 months ago.
UniSuper topped the rankings for customer satisfaction with an overall score of 70.9 per cent.
Industry communications director at Roy Morgan, Norman Morris, said the data was valuable in a market where engagement with super was low and performance data was complex.
“The overall assessment of satisfaction with financial performance by fund members clearly ranks the industry funds ahead of retail funds similar to the rankings given on performance tables,” Mr Morris said.
Only two retail funds featured into the top ten. They were Macquarie (7th place with 66.6 per cent) and Mercer (9th place with 64.3 per cent)
Top ten funds by customer satisfaction in financial performance
CARE Super 67.6%
Cbus Super 67.6%
Catholic Super 67.3%
First State Super 66.8%
The Council of Financial Regulators has broadened its charter and discussed systemic risks facing the Australian financial system.
The Council’s charter will include:
AIST attended the July 5 meeting of the Council, providing updates on ASIC’s product intervention power as well as product design and distribution obligations. A full summary of the items discussed can be found here.
Of note – albeit related to developments impacting on the mortgage sector - members of the Council, as well as the Australian Competition and Consumer Commission, are developing an online tool to improve the transparency of mortgage interest rates paid on new loans. This tool is expected to be available in 2020. This is of interest given AIST’s advocacy for a centralised superannuation comparison service portal.
11 July 2019