In a letter to Treasury in response to the Guidance on best practice principles for superannuation retirement income solutions consultation paper, the FSC welcomed the broad principles outlined but felt it lacked focus on customer empowerment.
“The best retirement outcomes come from empowered, engaged customers. Customers should be provided with the opportunity at all stages of their working life to learn about and engage with their superannuation and funds have a role to play in facilitating and encouraging that engagement.
“The FSC believes there is more that can be done to more clearly articulate the importance of empowering customers in their retirement to achieve the best individual outcomes,” the organisation said.
Of particular for the FSC focus in this regard is that individual outcomes need broader acknowledgement.
“FSC still believes that it is important that individual outcomes and choice be explicitly recognised in all retirement policy,” the letter stated.
“People have the best retirement outcomes when they are given the tools and services required to make choices based on their individual financial circumstances and with reference to their individual goals for retirement.”
The FSC’s letter added superannuation funds can assist in this regard through a “spectrum of guidance and advice solutions,” highlighting many individuals would benefit from receiving advice from outside their super fund. This could include providing access to guidance and advice to ensure the person has the appropriate settings in place and tools to make a more informed retirement decision.
The FSC also highlighted that under the draft principles, which propose dividing people into broad categories, it is unlikely individual needs will be met as funds will be unable to assess their personal or financial circumstances.
“While it may be administratively easy to divide customers into broad-brush cohorts, these cohorts will always only indicate some important attributes of an individual’s circumstances and will not necessarily allow funds to properly assess the needs of the individual (which is ultimately the proper domain of personal financial advice),” the letter stated.
“Importantly, these cohort decisions will be made based on very limited information as funds do not have, and do not need to have, oversight of the customer’s personal and financial circumstances outside of their interest in the fund.”
The FSC joined the Association of Superannuation Funds of Australia and the Financial Advice Association Australia in welcoming the new principles and supporting the government’s steps towards change but highlighted improvements that could be made.
“ASFA recommends where references are made on providing members with access to certain products (e.g. LIPs), that the language be drafted to clarify that, where a fund does not offer the product, providing a pathway to that product where appropriate (e.g. identified through personal advice that considers their individual circumstances) will still be considered as meeting best practice,” that organisation’s submission said.
