Super fund changes expected to rebuild trust

PLANNED rules to eliminate financial planners' commissions and overhaul the way superannuation funds operate will help rebuild trust in the nation's $1 trillion-plus retirement savings industry, key players said yesterday.

By InvestSMART · 22 Sep 2011

By InvestSMART ·
22 Sep 2011

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The head of National Australia Bank-backed MLC, Steve Tucker, said the landmark changes would end the battle between retail and industry funds, particularly in the fierce debate on fees.

"Whilst industry funds are a relevant and viable option for many Australians, their contribution to the super debate has, at times, been unhelpful and divisive and serves to undermine trust in a system which is largely operating well," he said.

"With the removal of commissions, and the introduction of a best-interest duty and two-year opt-in process, the campaign the industry funds have run against retail superannuation and financial advice can no longer exist."

He suggested divisions within the industry had been leading to rapid growth in self-managed super funds.

The Association of Superannuation Funds of Australia said changes would increase confidence in the industry. For consumers, this meant there was greater oversight of the provider and a greater focus on costs, commissions and after-tax returns, its chief executive, Pauline Vamos, said.

"These reforms protect the financial interests of those who are not engaged with their super, as well as respond to the overarching need for the industry to be set up to deal with the growing pool of retirees," she said.

Damian Hill, head of REST Industry Super, one of the nation's biggest industry funds, said the changes would improve the infrastructure supporting the system. "This should ultimately lead to lower costs and better outcomes for members," he said.

Detailed in the changes were plans to roll out MySuper, a low-cost default superannuation product.

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Frequently Asked Questions about this Article…

What are the planned superannuation reforms and how do they affect everyday investors?

The article describes planned reforms that would remove financial planners' commissions, introduce a best‑interest duty, implement a two‑year opt‑in process, and roll out MySuper — a low‑cost default super product. These changes are designed to increase oversight, reduce conflicts of interest and put more focus on costs and after‑tax returns for members.

Why would removing commissions from financial planners rebuild trust in superannuation?

According to industry leaders quoted in the article, removing commissions is expected to reduce conflicts of interest and curb aggressive product campaigning between retail and industry funds. That should help restore confidence that advice and product recommendations are focused on members' best interests rather than payments to advisers.

What is the 'best‑interest duty' mentioned in the reforms and what does it mean for members?

The best‑interest duty referenced in the article is a planned rule intended to require advisers and providers to act in members' best interests. In practice, this should give members greater protection and oversight over the advice they receive about their superannuation.

How will the two‑year opt‑in process protect people with default super accounts?

The two‑year opt‑in process mentioned in the article aims to make sure people with default super accounts are more actively engaged before ongoing advice or arrangements continue. This is intended to protect members who are not regularly engaged with their super by increasing oversight and confirming choices.

What is MySuper and why is it part of the reform package?

MySuper is described in the article as a low‑cost default superannuation product planned to be rolled out under the reforms. Its goal is to offer a simpler, cheaper default option for members who don’t choose a fund or investment strategy themselves.

Will these changes affect the growth in self‑managed super funds (SMSFs)?

The article notes industry commentary that divisions between retail and industry funds have contributed to rapid growth in self‑managed super funds. While the reforms are intended to reduce those divisive debates and rebuild trust, the piece only links that distrust to SMSF growth rather than claiming a specific outcome.

Which industry groups and fund leaders support the proposed changes?

Leaders quoted in the article who back the reforms include Steve Tucker of NAB‑backed MLC, Pauline Vamos of the Association of Superannuation Funds of Australia (ASFA), and Damian Hill of REST Industry Super. They said the measures should boost confidence, increase oversight of providers and help deliver lower costs and better outcomes for members.

As an everyday investor, what should I watch for after these superannuation reforms are implemented?

Based on the article, investors should watch for greater transparency around fees and commissions, stricter adviser standards under the best‑interest duty, availability of MySuper low‑cost default products, and communications about the two‑year opt‑in process. These changes are intended to help investors focus on costs, after‑tax returns and whether their fund is acting in their best interests.