The political clock and super uncertainty

The electoral clock is ticking and that means there is considerable uncertainty about the Federal Government being able to implement all of it’s superannuation policy agenda.

Given the amount of superannuation legislation currently before the Parliament and the matters being considered by the Productivity Commission it is hard to believe that the Coalition Liberal and National parties came to Government promising not to unduly tinker with the superannuation system.

As the superannuation industry closes out 2017 it has much to celebrate – the possibility of another calendar year of double-digit returns, the continuing growth in funds under management (FUM) and a regulatory score-card which should be the envy of other segments of the financial services industry.

But as super funds prepare themselves to enter 2018 there remain areas about which they should be concerned and, lamentably, those continuing areas for concern are a product of continuing Government policy machinations.

As Super Review goes to press, the Productivity Commission is continuing the major project dealing with the Competitiveness and Efficiency of the Superannuation Industry, the Insurance Within Super Working Group is continuing to deal with the implementation of a code of practice covering both funds and insurers, and the Government continues to press for the passage of its array of superannuation legislation through the Senate.

What superannuation funds should recognise, however, is that while all of these issues will undoubtedly continue to demand their attention in 2018, the electoral clock is ticking inexorably towards the next Federal Election and this, combined with the fluidity generated by the uncertain constitutional eligibility of parliamentarians in both houses makes it unlikely much change will occur.

While the Minister for Revenue and Financial Services, Kelly O’Dwyer sought to press the case for the Government’s legislation aimed at changing superannuation fund governance and default fund arrangements through the Parliament before the Christmas recess there was no certainty the Government could command the numbers in the Senate to do so.

Equally, there is no certainty that the Government’s legislation to include the Superannuation Complaints Tribunal (SCT) within the so-called “One Stop Shop” Australian Financial Complaints Authority (AFCA) structure will pass the Senate without being amended.

Given the amount of superannuation legislation currently before the Parliament and the matters being considered by the Productivity Commission it is hard to believe that the Coalition Liberal and National parties came to Government promising not to unduly tinker with the superannuation system.

The Government’s push to change superannuation fund governance arrangements is, of course, consistent with a long-standing Coalition policy stance, as is its view of default fund arrangements, but its actions with respect to the Superannuation Complaints Tribunal (SCT) is not even directly reflective of the recommendations of the Financial Systems Inquiry (FSI) and seems more an acquiescence to bureaucratic politicking.

Outside of the Government’s agenda, superannuation funds will need to be conscious of the policy line being pushed by the Australian Prudential Regulation Authority and, in particular, the suggestion that further fund consolidation should occur.

While there are undoubtedly smaller superannuation funds which, in the best interests of their members, should be encouraged to pursue mergers, there are others which, irrespective of their scale and funds under management, are providing exemplary service offerings and solid returns on investment. Simply put, FUM alone is not an accurate indicator of superannuation fund viability.

 

 




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