Parliamentary joint committee report on superannuation

A major parliamentary committee report on superannuation was submitted. The report, entitled The structure and operation of the superannuation industry, comes after a wide-ranging inquiry by the Parliamentary Joint Committee on Corporations and Financial Services, and after the full consideration of over 90 submissions from many organisations representing both the private and public sectors, and from corporations and individuals.

The committee held 6 public hearings in Sydney, Melbourne and Canberra. The role of financial advice was at the forefront of the committee's inquiry, and this was reflected in evidence before the committee.

Of particular interest were legislative barriers to cost-effective advice and how to overcome them in order to find a balance between consumer protection and accessibility of advice.

Advisors' remuneration was examined, especially concerns about conflicts of interest associated with commission-based remuneration models. The role of education and financial literacy programs also came under notice.

The report covers the regulation of the superannuation industry and describes industry trends that have resulted in total superannuation savings in Australia exceeding $1tn. The report examines reporting requirements of superannuation funds, including disclosure of promotional advertising and third party transactions with service providers and the propriety and transparency of these relationships.

Member investment choice, the role of the trustee and APRA's interpretation of law and policy are also analysed, as is the safeguarding of superannuation savings.

The report also addresses superannuation portability, exit fees and lost superannuation. The reasons for growth in the number of self-managed superannuation funds and issues relating to their administration, regulation and future viability are examined.

Some of the key recommendations made by the committee go to:

• A review of the laws governing superannuation to identify how they may be rationalised and simplified
• The formation of compulsory accounting and disclosure by all funds for promotional advertising, sponsorship expenses and executive remuneration
• The provision by ASIC of guidance to superannuation funds on targeted communication to separate categories of fund members without triggering the need for a statement of advice
• The implementation of an effective disclosure policy for product disclosure statements, annual reports, related party transactions, shelf fees, key service provision agreements and capital backing arrangements
• The introduction of mandatory unit pricing for all public offer superannuation funds
• The provision of online superannuation calculators
• Prohibiting exit fees that exceed the administrative cost of transfer
• The clarification of the role of trustees in super funds offering member investment choice
• The improved readability and standardisation of superannuation product disclosure statements
• The development of appropriate nomenclature where product recommendation advice is limited by sales imperatives
• The removal of the active member test from the definition of an Australian Superannuation Fund
• Consideration by the ATO of raising the maximum number of trustees for any one SMSF from four to ten, in line with current and future demand and
• Amending the auditing requirements for SMSFs run by qualified accountants.

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