APRA-regulated super funds could create better member outcomes by taking the same approach as SMSFs, according to research from Rice Warner.
APRA-regulated funds would find it easier to invest and provide financial advice to members if they pooled family superannuation in the same way that SMSFs do, allowing members to plan for retirement more effectively.
“The key advantage of SMSFs is that they pool family superannuation – more than 85 per cent of these funds have been set up for couples,” Rice Warner wrote. “This contrasts to APRA funds where the partners are usually not in the same fund, and where their accounts cannot be linked due to outdated administration platforms. Further, shifting from MySuper into a retirement product is tedious with cumbersome paperwork.”
Combining family accounts would also make it easier for funds to provide better financial advice by creating a more comprehensive picture of their financial situation and assets.
“As APRA funds look to providing advice for their members, they are hampered by holding only a part of a member’s financial assets, so any [intrafund] advice does not capture enough information to do more than recommend moving out of accumulation into pension phase,” Rice Warner wrote.
“Holding the superannuation assets of a couple within the same fund, such as an SMSF, materially improves the ability to facilitate the delivery of better financial advice.”
Pooling family accounts would also help in creating longevity protection and help members manage sequencing risk.
“As APRA funds contemplate the changes needed for the forthcoming Retirement Framework, they should think further about building a viable retirement service for their members,” Rice Warner wrote. “After all, if a highly fragmented segment can deliver something efficient, it should not be beyond the ability of those managing hundreds of thousands of members and tens of billions of assets.”
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