Rollovers from legacy pension products could happen within days if the federal government adopted changes proposed by the superannuation sector, according to a technical expert, who has rejected assertions from a government minister this work was too complex to be completed in a short time.
Australian Executor Trustees senior technical services manager Julie Steed said recent comments from Assistant Minister for Superannuation, Financial Services and Financial Technology Jane Hume showed Senator Hume was “familiar with the details but misguided as to what was involved in making the change”.
Speaking with selfmanagedsuper, Steed said the government could create a legislative instrument that provides an amnesty for any defined benefit pension or a market-linked pension in an SMSF or small Australian Prudential Regulation Authority fund to have the option to convert to the modern form of an account-based pension (ABP) where the entire amount supporting the pension would need to be commuted to commence an ABP.
At the same time there would be no request for any concessions in respect of existing Centrelink assets test exemptions other than the exclusion from the Centrelink five-year clawback, she added.
“This would be a simple transition and the industry moves clients from pension to pension thousands of times a day and it’s all automated and this is no different from a change of product or moving from accumulation to pension phase,” she said.
“I could very quickly organise for the current retail providers of term-allocated pensions/market-linked income streams to seek product-specific approval to move to ABPs.
“As an industry we could do these rollovers tomorrow, over a tea break.”
Steed said Hume’s claim that the legislative agenda was currently full should not get in the way of allowing rollovers out of legacy pensions as any changes would need to be made to the Superannuation Industry (Supervision) (SIS) Regulations, rather than the SIS Act, and as such could be done quickly and simply.
“The actual work required to make this change to the SIS Regulations will require less time and work than the current proposal to increase the numbers of members in an SMSF to six, which will require changes approved by parliament to the SIS Act.
She also responded to Hume’s comments that the government would welcome industry input on how to enact rollovers from legacy pensions and said the superannuation and retirement income sector had not been silent on this issue to date, but despite making submissions to Treasury had not received any response.
“On behalf of the industry I met with Treasury in February 2018 and provided a submission regarding the ability to allow legacy pensions to be converted to account-based pensions and also supplied suggested changes to the SIS Regulations,” Steed said.
She added the SMSF Association made a submission on the matter as part of its pre-budget submission in December 2019 and the Actuaries Institute had also made a submission in February 2020.
“Since then we have received no feedback at all from Treasury and it would appear they have no appetite to engage with us on this matter,” Steed said.
She noted if Treasury was concerned about the impact of any change on government superannuation defined benefit funds, it could be limited to funds with less than five members.