The federal government is unlikely to take any action in dealing with legacy pensions in the near future, claiming the level of work required to transition from them would not fit within a COVID-19-affected parliamentary agenda.
Assistant Minister for Superannuation, Financial Services and Financial Technology Jane Hume said the issue of legacy pensions, such as defined benefit and market-linked pensions, fell into wider discussions about legacy products within the superannuation sector, which were unlikely to take place soon.
Speaking at the recent Tax Institute 2020 National Superannuation Online Conference, Senator Hume acknowledged that while the recommendation from the Productivity Commission to transition legacy products to newer products sounded simple, the work required was extensive and complicated.
“This work does not come without significant costs to roll someone from an old product into something more modern, making sure there is no detrimental outcome,” Hume said.
Speaking about legacy pensions, she added: “I would love if it was as simple as a transfer over to a new product, but often it is not and it comes down to circumstances whether it is the right thing to do for every person, so I think these products will be around for some time yet because unscrambling that egg is a big deal.”
According to Hume the impact of COVID-19 on the Australian economy had pushed back a range of legislative measures and left no room for other issues.
“I would genuinely like to see this done, but in the yearly legislative agenda, the treasury portfolio takes up more than half of that time, and of that half the Hayne royal commission recommendations would take up 75 per cent and there is still the budget on top of that,” she said.
“All that is still true, but now we have COVID-19 as well, which is why the Hayne recommendations have been pushed out six months, and we still have COVID-19 and a significant budget to deliver in a few weeks.
“We have a really full agenda and this does not fall within this agenda. We would love to do it, but it is largely an issue of bandwidth.”
The government was open to input from the superannuation sector about how it could enact reforms, even at a product-specific level, she said.
“If there are specific products – and there is any help we can get from the private sector or advocacy groups to highlight specific products – and what the solutions would be to roll people out of them, we would be very pleased to take that on board because it is an enormous body of work,” she said.
“Everything we have done has been trying to simplify the system and make it more efficient and this is a fundamental part of that, but it is not an easy part.”
Earlier this year, SMSF technical expert Mark Ellem suggested the change in market values caused by COVID-19 related market downturns be used to managed transfer balance cap issues when moving out of the products and he suggested an amnesty be created to allow people to move from defined benefit to account based pensions.
