Editorial - Superannuation e-news September 2008

At the recent Investment and Financial Services Association conference the Honourable Mr Nick Sherry, Minister for Superannuation and Corporate Law, covered a range of issues that are of interest to us. He sought a deal with the financial services industry under which the Federal Government would aim to avoid "knee-jerk reactions" to situations while continuing to consult and listen widely to industry participants. In return he sought a commitment from the financial services industry to pursue "innovation, endeavour and good management". The Minister noted that while we face difficult times globally, he saw a high priority in continuing to improve the government's relationship with industry. We strongly endorse the fostering of stronger relations with Government and the elimination of "knee jerk" reactions. As we have often stated before, superannuation is a long term proposition, requiring not just long time horizons but great care in the way changes are introduced.

The Minister also made mention of the fact that there are a significant level of what he referred to as "outdated products" that are more likely to be at risk of error or fraud. He is obviously keen to see that these funds are "invested more efficiently and more safely". Again, we concur with that view and would add the following: If the Federal Government is serious about this matter it should address the issue of significant investments that are currently held in superannuation as legacy products. As part of addressing the issue of legacy products the Minister may seek to provide at the very least, a window of opportunity for those with market linked or related income streams that may be transferred into account based pensions. This would certainly provide an overdue response to improving the retirement savings and income paying arrangements for those who have been left holding the baby following the introduction of Better Super.

Any reforms that provide real and tangible benefits for such products are clearly to be encouraged. The argument that was put by the funds management industry and accepted by the previous government needs another good looking into.

There is limited if any argument likely to hold water in the SMSF context that would prevent this liberalisation.

The Minister also brought to the fore the ongoing problem of "lost" superannuation accounts. They currently represent well over $10billion in savings. He has shown a determination to do something about this extremely large level of retirement saving assets that appear to be lost. His preference is for an opt-out arrangement based on TFNs. This would enable the consolidation of such accounts in a simple and effective manner. We wouldn't argue with that approach if it re-unites members with their lost superannuation savings.

The recent announcement by the Federal Government in relation to the arrangements for the superannuation savings of Temporary Residents when they depart the country has much to recommend. In a nut shell this proposal will ensure that such savings are treated in the same manner as that of residents, but the funds will be transferred to general revenue if not claimed by the Temporary Resident within six months of departure. The funds may be claimed at any future date