Treasury ‘confident’ in trustees’ ability to avoid providing financial advice
The Treasury has released its final report on the Retirement Income Covenant, saying it is confident superannuation administrators can meet the requirement without providing financial advice.
In its final report on the Draft framework law on collective investment vehicles for companies (CCIV) and other measures, The Standing Senate Economics Committee concluded that it was confident in the Superannuation Administrator’s ability to meet the requirements.
Committee Chairman Senator Paul Scarr said: “With respect to the issues raised by the authors in formulating and implementing their strategy, the committee is confident that the trustees can meet the requirements of engagement and create effective retirement income strategies without providing financial advice or breaking anti-peddling laws.
“Furthermore, the committee understands that the Treasury’s review of the quality of the financial advice consultation process will explore whether financial advice concepts could be simplified.”
“The committee recommends that the bill be passed as soon as possible to provide certainty for stakeholders working towards the July 1, 2022 deadline for implementing the CCIV and the retirement income covenant.”
The comments followed submissions from organizations such as the Australian Institute of Superannuation Administrators (AIST) which noted practical concerns related to overlap between what was expected of superannuation administrators in terms of guidance and what was considered advice.
The Financial Planning Association of Australia (FPA) also noted that superannuation administrators had access to personal information about beneficiaries, which created a ‘very fine line’ between providing factual information and providing advice. .
“The FPA argued that superannuation trustees have access to personal information about recipients, which draws a very fine line between providing factual information and providing general or personal advice, as the recipient may assume that the trustee has considered the individual’s situation when ‘helping’ with their retirement income needs.
The report also confirmed that trustees of self-managed pension funds (SMSFs) would be excluded from the agreement as they were “significantly different” from funds regulated by the Australian Prudential Regulation Authority (APRA).
Adam Hawkins, Assistant Secretary, Taxes and Transfers Branch at the Treasury, said: “An APRA-regulated fund has a very large membership, potentially millions of members, and will need to gather information in order to formulate its strategy; whereas a self-directed pension fund will know its members intimately, so the need to gather information and then strategize about what kinds of services or products might be right for them is not as involved as for an ARPA -regulated fund”.