Industry funds build Budget pressure for DBFO
Yet another major industry superannuation fund has called on the Government to expedite changes to the financial planning regime as part of the 2025 Budget.
Big retail sector fund, Rest, has used its pre-Budget submission to urge urgent action on financial advice reform and retirement with two priority recommendations – legislating Tranche 2 of the DBFO reforms as soon as possible and legislating to allow superannuation contributions in the retirement phase.
It said the DBFO reforms provide “a pathway for super funds to cost-effectively increase the scope and reach of financial advice, while also maintaining strong consumer protection for members”.
“Many of our members would simply not be able to access advice if it wasn’t available through Rest – so expanding financial advice within super will help more of our members make informed decisions to improve their retirement outcomes. Rest offers digital advice tools, which have allowed us to expand the reach of our financial advice service to our members,” it said.
“The DBFO reforms give us the opportunity to further expand the service we provide our members.”
“Secondly, we welcome the ongoing conversation and commitment from Government to make changes to improve the retirement phase of superannuation,” the submission said.
“Our experience working with our members shows that retirement is a flexible transition, often involving movement out of and back into the workforce, and ongoing work into retirement. This reality of working patterns in retirement is inconsistent with the binary nature of the superannuation system, which does not allow contributions to be made to products in the retirement phase.”
“Rest recommends the Government remove the existing prohibition on making contributions to existing account-based pensions (including for retirees aged over 75 years) in order to simplify the system, provide more flexibility and choice for retirees to manage their retirement income streams and reduce the need for multiple superannuation accounts.”
The Rest submission said industry modelling suggests this change would remove duplicate fees for about 100,000 retirees.
“Rest acknowledges that considerable consultation would be required on such changes to these products but believes that these kinds of innovations to simplify the system and products available that work for the majority of working Australians will lead to better retirement outcomes.”
The REST balanced accumulation option has returned 5.6% p.a. over 10 years and charges nearly 1% for the privilege. I’m not surprised they want an urgent FUM retention strategy in the form of an in-house sales call centre masquerading as advice. If best interest applied to a REST adviser they couldn’t possibly justify staying with REST.
Is it really a “balanced” option though…with 70% allocated to growth assets…
Don’t forget in 2021 ASIC sues REST Super for misleading conduct
The corporate watchdog has accused the $60 billion REST Super of misleading and deceptive conduct, alleging the industry superannuation fund tried to stop members transferring their savings to a better performing fund.
The Australian Securities and Investments Commission civil case, filed in the Federal Court on Tuesday, alleges REST gained a benefit from the deceptive activity over a decade by retaining members who would have otherwise left, which subsidised fees for other members and increased the size of the fund.
The action underscores the advantage to funds that have won “default” status, particularly industry funds, where “zombie” accounts left behind by itinerant members have subsidised fund scale but resulted in an extra $2.6 billion in annual fees.