The ACTU has today called for more regulations to protect the retirement savings of employees including a ban on superannuation guarantee commissions paid to financial planners.
Speaking at a Conference for Industry Super Fund Trustees in Melbourne today
(Tuesday 10 May), ACTU Secretary Greg Combet said:
“The ACTU is worried that when the new ‘superannuation choice’ laws take
effect from after 1 July unscrupulous financial planners will move their clients
super from one fund to another – in processes known as mis-selling and churning
– to gain more commissions and fees.
Higher fees will eat into employees super accounts and ultimately leave them
worse off when they retire.
The Federal Government should move to prohibit commissions on super guarantee
contributions. This will remove the incentive for unscrupulous financial
planners and ensure super fund members know how and what they are paying for.
The ACTU is concerned that the way the Government’s superannuation choice
system is being implemented is deeply flawed and believes that problems that
need fixing include:
Poor fee disclosure regime. Current rules mean super funds only need
to disclose the first year of fees. This will lead to “honeymoon rates” like
those that credit card companies advertise. We all know that in the long-term
customers ending up paying more. It is ridiculous that a 40 year investment can
be sold on the basis of a one-year honeymoon rate.
funds should disclose their fees over a minimum five-year period and explain the
effect of fees over the long term.
Inducements for employers. In effect the choice legislation will be
choice for employers not employees, with banks and financial planners able to
offer employers inducements such as payroll or advice services to make their
fund the default fund for employees. Also, employers may be offered reduced
interest on their business loans or better credit arrangements & APRA will
have difficulty regulating these practices even though offering such inducements
is not lawful.
relationships between banks, financial planners and the small minority of
unscrupulous employers who might use their employees super as leverage to lower
their own business banking costs.
Lack of knowledge among many workers will prevent people from making
an informed choice. Many will be driven by what the default fund is at their
workplace or perhaps rely on advice from their financial planner or accountant
whose advice may then be driven by which fund pays the highest commission.
super fund members. The current proposals are insufficient with the Taskforce
established to run the education campaign estimating it will take ten years to
get through to most people.
The main goal must be to ensure that working Australians have access to low
cost superannuation that enables them to retire with dignity and in comfort
rather than be forced to work until they drop.
Unions are proud of the fact they worked with the Labor Government to
introduce universal superannuation in 1985. At that time only 39% of employees
had super, now 97% of the workforce has super.”