Yesterday the newly minted Turnbull Government released its response to the recommendations of the Financial Services Inquiry (FSI), more commonly known as the Murray Report.
The FSI’s findings were first released in December 2014 in answer to a brief to ‘best position Australia’s financial system to meet Australia’s evolving needs and support economic growth’. In all, 43 of the 44 recommendations were endorsed by the Turnbull Government, with the only one to be rejected a recommendation to reduce borrowing by superannuation funds.
Media coverage was swift and brief, concentrating in the main on a crackdown on excessive credit card transaction surcharges.
But of more interest to the millions of Australians who are in, or transitioning to, retirement were the many recommendations regarding super and retirement income. In particular, the need to confirm, by legislation, the objective of Australia’s $1 trillion superannuation industry, to ‘serve as a guide to policy makers, regulators, industry and the community about superannuation’s fundamental purpose’, according to the government statement.
Additionally, the Productivity Commission will be asked to create criteria which will help assess the efficiency and competitiveness of the the super system. And financial planners will be under scrutiny as the Government develops amendments to legislation to raise ‘professional, ethical and educational standards’ for those who purport to manage your money.
Read more about the FSI and its recommendations.
Read more detail of the Government announcement in The Guardian.
Opinion: About B***** time
About time too, is the obvious rejoinder to the news that the objective of our superannuation system will finally be enshrined in legislation. Ditto the need to raise the standards of financial advisers.
At one level it is laughable that a $1 trillion system that was first introduced in 1992 has no clearly defined objective. At another, it is a national disgrace. Yes, it was a bold and productive policy initiative to ensure workers from all walks of life would have the benefit of mandatory savings in retirement – not just the professional classes and upper level public servants. But when the system was introduced, surely its primary aim should have been spelt out? This may have prevented the current misuse of super – as a haven for surplus cash for the rich, rather than a vehicle to ensure all Australians enjoy a dignified retirement. Those in doubt need only look at the sums – most benefits go straight to the wealthiest quintile of the population and stay there, ready to swell the next generation’s inheritance. In other words, those who will never need to claim an Age Pension are most likely to use superannuation as a structure to avoid tax. Instead, these foregone funds supporting overly generous concessions could be used to top-up meagre fortnightly pension payments for a much higher proportion of the population.
Defining a clear objective for our system would help policy makers – governments of any hue – decide on legislation which best suits this purpose. And the public could then decide whether the government of the day does have the best interests of the population at heart. One of the stated aims of the FSI was to lift the value of the superannuation system and retirement incomes. This will only ever happen if we start with the end in mind, so the Turnbull government is to be applauded for accepting this key recommendation. And as for improving the ethics, education and qualifications of financial advisers, that is obviously a no-brainer. But it will be a very difficult task as we are starting from such a low base.
What do you think? Is defining the primary aim of super important? And is raising the standards of financial advisers a priority? Are there other recommendations from the FSI that you believe are important?
