Speaking at an Industry Super Australia event, Financial Services Minister Stephen Jones gave a firm indication he is leaning towards heeding Michelle Levy’s recommendation to bring back superannuation funds to financial advice.
“There are 16,000 licenced financial advisers in the country, so the numbers don’t square. So, we’ve got to find a way to deliver information and advice to members who are approaching retirement,” Mr Jones said.
“Whether you like it or not, one of the first phone numbers that they call is their superannuation fund. At the moment, law that has been passed by the previous parliaments, supported by me, puts an obligation on funds to put in place a strategy for their members for their retirement phase.
And at the very same moment, we put in all of these obstacles, which make it almost impossible for the funds to do anything about that. So, I’m keen on squaring that off,” he explained.
As part of the Quality of Advice Review (QAR), the reviewer, Ms Levy, recommended the removal of obstacles that prevent super funds from providing more retirement advice to their members.
Addressing the QAR on Thursday, Minister Jones said that the government is “looking at it” alongside other recommendations and hinted at an imminent announcement on the matter of super funds.
“Five million people are at or near retirement. They need access to information. They need access to advice. They go to their superannuation funds and their superannuation funds send them away. The existing rules make it difficult for funds to even ask some pretty basic questions and provide some pretty basic information.”
“The government will be considering some recommendations very, very soon on that, not of the review but of myself and bringing in a bunch of other things that we’ve been looking at and working on. So, I hope to be in a position in the near future to provide a formal response on some of these things,” Minister Jones confirmed.
Moreover, he reiterated the government understands the issue at hand and firmly believes that maintaining the status quo would not resolve it.
“We just think Australians have got to have access to better info and advice,” he said.
“One small example of why, if you’re in the accumulation phase, you pay 15 per cent tax, if you’re in pension phase, you pay 0 per cent up to your pension cap. There is an extraordinary number of Australians over the age of 65 within active accounts that are still in accumulation phase. That’s good for the tax revenue of the country, but it’s not necessarily in the best interest of that individual and there might be a reason, but I suspect that one of the reasons that they’re still in the accumulation phase is that they have had no information or advice which tells them how they can make that money work better for them and go further in retirement.
“And I think there are really simple things we should be able to do to meet that objective of retirement income.”
Last month, Minister Jones acknowledged that he was seriously considering allowing entities other than relevant providers — professional advisers currently registered as such — to provide advice. Responding to his announcement at the time, Ms Levy said she was disappointed by what was implied.
Namely, Ms Levy’s recommendation for the return of super funds to advice also included the banks and insurers.
“I am worried he may introduce them for super funds and not also banks and insurers,” the QAR lead said.
“This I think is because super funds have a duty to act in the best interests of members. I do not think there should be different treatment across them.”
Independent financial advisers have been heavily critical of the idea that funds could be given the green light to enter the financial advice industry in a more prominent capacity.
