The final report of the Hayne Royal Commission was publicly released on 4 February, containing 76 recommendations for the Government.
These recommendations covered a wide range of aspects of the financial services industry, including superannuation.
Rest has been examining these recommendations, and the response of both the Australian Government and the Opposition, closely to determine how they could impact our members and employers.
One of the Commissioner’s key recommendations for superannuation concerned the creation of default accounts.
Commissioner Hayne noted that he agreed with the Productivity Commission’s view that default super accounts should only be created for new workers and should then be carried with them as they move jobs.
His specific recommendation said: “A person should have only one default account. To that end, machinery should be developed for ‘stapling’ a person to a single default account.”
We support, in principle, this recommendation that new workforce entrants only default into super accounts once.
We’ve long supported measures that reduce multiple accounts and the resulting unnecessary costs to members.
However, it’s important that Government and industry carefully consider how this “machinery” will work.
We should be particularly mindful of the impact of this proposal on Australians who change careers and whose personal circumstances change to ensure their insurance cover and their investment asset allocation continues to meet their needs.
As a profit-to-member superannuation fund, we are proud that Rest members have benefited from low fees and top-quartile investment performance over the long term*. We are proud that we provide flexible insurance designed for our members’ needs, as well as access to affordable financial advice.
Rest firmly believes members’ best interests are supported when they are allocated into a fund that has been carefully considered to be competitive and relevant to their needs. The current Fair Work Commission process of reviewing the authorised default funds attached to modern awards fulfils this.
The current MySuper and SuperStream initiatives provide a solid foundation to address many of the current issues affecting superannuation, including reducing multiple accounts, removing underperforming funds, and ensuring disengaged members aren’t paying for options they don’t need or want.
But we also believe there should be tougher performance criteria for funds in the current Fair Work Commission review process.
For funds to retain their default fund eligibility, they should have to meet stronger criteria that aim to maximise superannuation account balances, retain insurance coverage and insurance benefits (including Income Protection), as well as providing access to affordable financial advice.
This, coupled with the enhanced APRA outcomes test and strengthened RSE licence powers, would assist in reducing multiple accounts and limiting fund balance erosion, so more Australians can save more for their retirement.
We also believe there should be a mechanism that prompts members to consider their insurance cover when they change jobs or careers, without limiting their ability to move their retirement savings to a fund of their choice.
Of course, this is just one of many recommendations that may impact our members and employers. Commissioner Hayne also made recommendations regarding the creation of universal terms and definitions for insurance in super, and changes to the way advice can be provided to members among others.
We will continue to work through these recommendations and any subsequent Government proposal and keep you informed of the potential impacts.
*Rest members invested in Rest’s Core Strategy investment option. Performance is net of investment fees and tax. Past performance is not an indicator of future performance. For more details go online to rest.com.au