No performance test for retirement products – FSC

The Government would be wrong to seek to extend the superannuation performance test to retirement income products, according to the Financial Services Council (FSC).

At the same time, it said the individual outcomes needed to remain the focus of national retirement policy.

Commenting on the current Treasury consultation on Retirement Reporting the FSC has also sought to emphasise the importance of individual rather than group retirement outcomes.

FSC chief executive, Blake Briggs said that while his organisation noted the consultation stress on transparency, it wanted to caution against the Government against using collected to extend the Annual Performance Test to retirement phase.

He said the FSC had long argued the performance test is not appropriate for retirement products because investment portfolios vary significantly between individuals, depending on their retirement goals, making product comparisons a fraught endeavour.

“Performance testing of retirement products would lead to adverse outcomes, given that retirement is personal and should not be treated uniformly,” Briggs said.

“No two people’s retirements are the same and should not be treated as such by the Government or superannuation funds,” he said. “Retirement policy should focus on ensuring that people are given the tools to make decisions that steer them towards the kind of retirement that they want, this includes access to guidance, financial advice and a range of products to help shape their futures.”

Briggs said that while the published Principles reflect an increased focus on the retirement phase of the superannuation system, the FSC is calling on the Government to continue to maintain its focus on individual outcomes.

“We are pleased to see Treasury’s framing of the principles starting to focus more on individual outcomes, which we think is vital to ensure people have choice when it comes to choosing their superannuation and empowers them to select investment strategies that align with their financial goals and personal values,” he said.