The Association of Financial Advisers (AFA) has hit out at Minister Bill Shorten for rushing the MySuper automatic consolidation legislation through Parliament.
Last week, the Parliamentary Joint Committee on Corporations and Financial Services handed down their report into the third tranche of superannuation legislation, having been given just two weeks to compete their investigation (see: News in Brief – PJC Recommends Third MySuper Bill Should Be Passed).
AFA CEO, Richard Klipin, said the legislation was infringing on advisers’ rights and the industry had not had sufficient time to debate the key issues.
Specifically the AFA is concerned about the mandatory transfer of default accounts to MySuper products, which would take effect from 1 July 2017.
“We are very concerned that the scope has been expanded to include people who have specifically selected the default option, Mr Klipin said. “While this is subject to an opt-out approach, where it is based upon one communication, it is simply inappropriate.”
“The mandatory transfer could result in members losing benefits associated with their existing fund, before they are even aware of it. For example, members who are forced into a MySuper option might lose some or all of the life insurance cover they hold in their previous fund. Although life insurance cover should be available to them in the MySuper fund, it may be inferior to their existing cover, particularly if they have pre-existing medical conditions,” he said.
Mr Klipin accused the Government of ‘tricky drafting’, saying the legislation intentionally infringes advisers’ property and income rights. “It appears that the legislation has been purposely drafted to deprive advisers of the earnings they receive from existing default option superannuation clients. This represents an acquisition of property rights on unjust terms, which would in other circumstances be contrary to the constitution.
It appears that the legislation has been purposely drafted to deprive advisers of earnings
The Association also expressed its concern over the ability for super funds to cross-subsidise advice via an administration fee which could be charged to all members.
According to Mr Klipin: “While the Future of Financial Advice reforms require complete transparency in fees paid by clients, intra fund advice fees are hidden in the administration fee and are paid by all members regardless of whether they get advice or not. This lack of transparency is not in the best interest of super members.
“The community’s confidence in the superannuation system is at stake and the MySuper bills as they currently stand will further erode this confidence. It is time to get good policy back on track.”
Funny how for adviser’s they making clients adopt an opt-in approach but for MySuper it is an opt-out approach.
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