Industry welcomes super planning changes

The financial services industry has broadly welcomed the passage through Parliament of the legislation delivering the Retirement Income Covenant (RIC) notwithstanding concerns about how it will play to the delivery of financial advice.

The passage of the legislation was welcomed by the two big superannuation funds representative organisations the Association of Superannuation Funds of Australia (ASFA) and the Australian Institute of Superannuation Trustees (AIST) but mainly because it also delivered the removal of the $450 monthly salary threshold for superannuation contributions.

AIST chief executive, Eva Scheerlinck said removal of the threshold represented a positive step towards achieving better retirement savings outcomes for low paid workers.

At the same time, ASFA chief executive, Dr Martin Fahy offered a similar welcome while big Queensland fund QSuper noted the removal of $450 monthly income threshold for super contributions would particularly help young and low-income members while other messages contained in the legislation lowered the age threshold for super downsizer scheme from 65 to 60 (which will help members near retirement convert equity from their home to superannuation income) and the removal of super contribution “work test” for those aged from 67 to 74 inclusive (which will help older members continue to build their retirement balances)scheme.

The Financial Planning Association (FPA) chief executive, Sarah Abood noted the legislations impact on financial planning including that it established requirements for trustees to outline to members how their superannuation fund’s retirement income strategy would assist them in their retirement.

“This is an important improvement on the current legal obligations for super funds, which have to date been mainly focused on the accumulation phase of members rather than their retirement,” her statement said.

“On behalf of its members, the FPA has been long calling for new retirement income products to be developed for Australian retirees which allow them to select the best options to suit their unique retirement needs. The ‘one size fits all’ approach in the system has limited the ability for retirees to mix income, lump sum, longevity and market risks adequately. Given these changes, financial planners now look forward to their clients having the ability to access a broader range of options.”

“We also welcome the additional clarification and certainty provided by Parliament on time frames for time critical advice provision which ends a long debate over the definition of “days”.”