SMSF regulation needs ‘further consideration’
There is a need to confirm that the level of prudential oversight for the SMSF sector is appropriate to manage the potential for systemic risk, according to the Actuaries Institute’s response to the FSI’s interim report.
In its submission, the Actuaries Institute stated that the SMSF sector is “lightly regulated” by the ATO, whereas commercial and industry schemes are supervised by ASIC or APRA.
Speaking to SMSF Adviser, Actuaries Institute chief executive David Bell said the SMSF sector needs to be reviewed from a regulatory perspective given its significant size.
Mr Bell also suggested that while APRA is not currently responsible for the regulation of the SMSF sector, the option of having APRA as a regulator should be looked at.
“If the sector is not appropriately… regulated, then the potential for systemic risk is higher relative to a regulated sector,” Mr Bell said.
“So given that there’s such a large amount of money in that sector, it seems to make sense to look at that aspect of it.”
The Actuaries Institute’s submission noted systemic risk could occur in the event of “widespread” inappropriate investment strategies such as excessive property gearing or large-scale mis-selling.
Speaking more broadly, Mr Bell said the Actuaries Institute is focusing on achieving a “coordinated and consistent” approach to dealing with retirement income in Australia.
“The Institute reiterates its previous recommendations to the FSI, especially the need for an overarching policy framework to manage retirement income-related issues,” the submission stated.
“In Australia, we currently have a large superannuation system that focuses on wealth accumulation but lacks the same focus on retirement income streams that will sustain retirees’ future living standards.
“The current system is complex and individuals often lack the financial skills to make critical decisions about retirement funding.”