Super funds ‘inherently conflicted’ on intra-fund say Super Consumers
A superannuation consumer group has cautioned the Federal Government against allowing an expansion of the intra-fund advice regime in the context of the Retirement Income Covenant, arguing that it will create superannuation fund conflicts of interest.
Super Consumers Australia has canvassed Australia setting up a function similar to the UK’s Money and Pensions Services, arguing that superannuation funds are inherently conflicted in providing advice around retirement income products.
It pointed out that the Pension Wise service in the UK gives people access to free, impartial, specialised guidance – delivered face to face or over the phone – about pension options and provided a free online tool to help people choose how best to access their pension money.
Referencing calls by some superannuation funds for an expansion of the intra-fund advice regime, Super Consumers Australia said it would “encourage policy makers to proceed with caution with this approach as there is an inherent conflict in allowing funds to provide guidance on their own products”.
“By way of a simple example, a fund in which the average member has a very low retirement balance may justify only providing an account-based pension in the retirement phase on the grounds that this is the best solution for its members,” it said. “This fund has no incentive to inform its customers about other types of products that may help them achieve their retirement goals.”
“This would be a disservice to members in cohorts which the fund has decided aren’t significant enough to develop specific strategies. Without independent guidance these groups of consumers may not look beyond the products their fund has on offer, which may be totally inappropriate for their needs.”
Super Consumers Australia said this was why it saw a strong need for a new model and cited the UK experience with the Pension Wise service.
“Given we are about to start a new market of new retirement income products for people, Australians are going to be in the same position as UK consumers. Equally middle Australians could benefit from a service which provides access at scale to independent and conflict free guidance.”