HESTA wants retirement income stream default mechanism
Yet another major industry fund has sought to ramp up pressure on the Federal Government to deliver the next tranche of the Delivering Better Financial Outcomes (DBFO) legislation to enable it to ‘nudge’ members towards retirement products.
Big health industry fund, HESTA wants the Superannuation Industry (Supervision) Act (SIS Act) to be amended “to enable funds to default eligible members into a retirement income stream (with opt out as an important consumer protection”.
In doing so, it released the results of research it commissioned from Laneway Analytics to claim that “Australian retirees are missing out on billions in retirement benefits by not transitioning their superannuation to retirement phase, where they could benefit from tax-free investment earnings”.
It said the research shows that in the 2025 financial year up to 1.8 million Australians collectively, and often unknowingly, missed out on an estimated $2.46 billion in additional investment earnings.
“Without reform, this figure is projected to rise to more than $5 billion annually by 2030, impacting an estimated 2.9 million Australians,” the fund said in its pre-Budget submission.
The submission said that the draft “DBFO Bill does not address the slow take-up of retirement products”.
“Reforms proposed in the UK would allow funds to direct certain disengaged cohorts to specific retirement journeys/products that would deliver better outcomes for them. We recommend a similar approach be applied in Australia, amending proposed DBFO reforms to allow targeted superannuation prompts”.
“Sensible consumer protections should be built in, for example, limiting prompts from accumulation to retirement to members who are in a MySuper product; and limiting prompts to specific cohorts for example, a combination of age and contribution inactivity.”
Outgoing HESTA chief executive, Debby Blakey said: “We’re calling for changes that would allow super funds to actively help eligible members transition to retirement products. This simple change could make a profound difference to Australians’ retirement outcomes.
“This isn’t just about individual retirees – it’s about Australia’s future. By enabling retirees to maximise their retirement income, we’re supporting we’re supporting more dignified retirements and helping to boost the economy.”
“The change advocated for by HESTA includes implementing ‘soft defaults’ that would automatically transition eligible members to retirement phase products at a certain age when they’re no longer making contributions. The proposal would maintain clear member opt-out options.”
“The research modelling shows that transitioning to retirement phase products could boost a member’s total retirement income by up to 12%, or as much as $99,000, compared to those who delay transitioning by four years.”
What an absolute load of rubbish.
In my opinion, this is a way to retain FUM by locking in members for life and restricting advice to their products only – notably if the retirement product that is recommended by the fund is a non-transferrable income stream.
What a load of garbage. So instead of delivering actual needed retirement advice the industry funds can completely avoid this by ‘nudging’ a client to stay in their one solution and avoid advice and choice all together.
This is monopolistic corporations preying on the unadvised client.
Totally disgusting attitude towards vulnerable retirees.
This approach allows no accountability and seeks simply to hold retirees hostage and ill-informed about the many needs approaching and transitioning to retirement.
This is completely ignoring the needs of Australian retirees so that the monopolised industry funds can continue to take fees for no advice from their clients.
Maybe with the industry funds and Labour Party Bikie links we can get the Rebels or Comencheros to ‘nudge’ Hestas clients to stay where they are and not seek real advice, because the bosses(Labour Party) need some funds to pay for them and their families to travel at the tax payers expense. They have to get the money from somewhere, so why not hit up retirees who are an easy target with no control over their own money. Nice try HESTA, but we understand the business model you operate, and Australia’s retirees deserve better than the extortion racket your running.
HESTA wants a free ride with no accountability. This is what they are proposing. As a product they want the Government to give them the ability to dictate what advice that their captive audience is allowed to receive. If the Government allows this, then all products will then have the ability to monopolise their clients and hood wink them into believing they are receiving personal financial advice when they are actually being flogged a single product. Isn’t this what the Royal commission was all about stopping, and that’s why the banks left the industry. I would say that leaves the door open for the banks to reenter and start flogging their products as well, and why then can’t other products become quasi advisers. It’s an insult to real advice practitioners who have been through hell to gain the qualifications and the recognition as a profession. Now any Joe blow working for the Industry Funds can give advice, but disguise it as real financial advice. It’s a huge deceptive & conflicted approach that will have the lawyers rubbing their hands together.