The Financial Services Institute of Australasia (FINSIA) has called for the primary objective of superannuation to be legislated, arguing this oversight is holding the industry back from reform.
In its submission to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, FINSIA said without political support for super’s primary objective “to provide income in retirement to substitute and supplement the age pension”, the sector remains vulnerable to regulatory interventions and business practices that are not in the best interests of beneficiaries.
FINSIA chief executive Chris Whitehead said: “Australia’s superannuation industry has reached maturity without a legislated purpose. It is in the interest of all working Australians that this bill is passed and superannuation’s objective is prioritised to protect Australians’ retirement savings.”
The industry must also use the overall objective as a guide to ensure a baseline of quality products is available with sufficient consumer protections in place for those who are disengaged, Whitehead said.
FINSIA also addressed the lack of transparency in the super industry, including the need for more thorough reporting to consumers on issues such as the performance and ranking of super funds, suitability of additional services and the fees related to such services, and the ability to give consumers the option to opt in.
Its submission said super funds can only be properly governed by directors who are able to demonstrate levels of conduct and competency that correspond with their role of providing oversight in delivering income to fund members.
Further, the submission called for “better management of potential conflicts of interest, such as the issue of activist capture for fund boards and its impact on investment decisions and situations where asset consultant firms are also product producers for the same fund”.
Boards must show they have the tools and expertise to manage such conflicts as they arise, it said.
Another recommendation in FINSIA’s submission includes shortcomings identified recently by the Productivity Commission, including the need for super fund boards and management to raise their professional standards through professional training and abiding by an industry-wide standard of conduct.