Industry Super Network congratulates Australian Government on new superannuation laws

Industry Super Network congratulated the Government on the passing of two historic new laws in Parliament that will significantly improve the retirement savings of working Australians: the increase of the Superannuation Guarantee to 12 per cent and the introduction of the Low Income Super Contribution (LISC).

Read the Media Release here.

A week of super milestones

The last few weeks have seen some historic changes for the superannuation industry – and especially for members and consumers more broadly.

On 19 March, the Australian Parliament passed legislation to raise the Superannuation Guarantee from 9 to 12 per cent. This move will significantly improve the retirement savings of working Australians – an average 20-year-old hairdresser will see an estimated $110,000 jump in retirement savings, while a 29-year-old clerical worker is likely to gain an extra $78,000*. It will also lift the nation’s overall superannuation savings to $500 billion by 2035.^

The Low Income Super Contribution measure was also passed – this legislation will provide more than 3.6 million low income earners with significant tax relief on their super contributions, ensuring that they are not disadvantaged by paying the same amount of tax or more on their super than they might pay on their wages. ISN estimates that low income earners stand to gain around $40,000 over their working life from the new low income contribution.

On Thursday 22 March, the Future of Financial Advice Bill was passed in the House of Representatives (it is yet to be passed in the Senate). This legislation represents an historic victory for Australian consumers, as for the first time financial planners will be required by the law to act in their best interests, and sales commissions and other forms of conflicted remuneration will be prohibited. In the long term, these reforms will bring about cultural change in the financial advice industry so that the industry can assume the title of a trustworthy and credible profession.

According to research by Rice Warner Actuaries, the reforms will result in numerous benefits to consumers, the financial planning industry and national savings:

• The provision of financial advice will increase to 1.76 million pieces of advice – approximately 135 per cent – by 2026. This will be driven by an increase in the provision of scaled advice by more than eight-fold to 1.1 million pieces of advice in 2026.
• Superannuation and other savings by individuals are estimated to increase by around $130 billion by 2026. This will flow from an increase in contributions (under advice) and the redirection of fees into savings.
• The cost of financial advice is anticipated to reduce, with the weighted average cost falling by around 44 per cent, from $2,135 in 2011-12 to $1,188 in 2025-26. For the first time, many Australians will begin to access financial advice at a price they can afford.
• Average adviser incomes are expected to grow strongly in real terms, from $182,000 per annum to $260,000 in 2026 (after inflation and in today’s figures). Total financial adviser employment will remain broadly stable.

Over the past few years, the Industry Super Network and industry super funds have advocated for these reforms to the superannuation and financial services sectors. We have done this in our mission to maximise the retirement savings of our five million Industry SuperFund members. So, it is at times like these when all of our efforts seem well and truly worthwhile and our reason for being is truly validated.

The two landmark changes that have occurred in Australians’ super system in recent weeks will further strengthen our super system. Given the compulsory nature of super, and the importance of super to Australians’ future economic wellbeing, these changes will be best measured by the benefit they deliver fund members.

*Treasurer’s economic note, 18 March 2012

^Media release: More Super for Australians, Bill Shorten, 18 March 2012

New super laws to improve retirement savings of working Australians

The raising of the Superannuation Guarantee to 12 per cent and the introduction of the low income super contribution legislation represent significant wins for industry super fund members.

Two historic new laws that will significantly improve the retirement savings of working Australians were passed in Parliament last week: the increase of the Superannuation Guarantee to 12 per cent and the introduction of the Low Income Super Contribution (LISC).

The increase in the Superannuation Guarantee is expected to yield considerable additional retirement savings for both individuals and the nation. With 12 per cent guaranteed contributions, a 30 year old earning average full time wages will now have an extra $108,000 in retirement savings. The introduction of the LISC will provide tax-free super for more than 3.6 million Australians earning less than $37,000.

David Whiteley, Chief Executive, Industry Super Network said that the passing of the laws would ensure that Australians were able to build adequate super savings for a dignified retirement and provide low income earners with the opportunity to improve their overall retirement savings.

“The lifting of the Superannuation Guarantee to 12 per cent represents an important milestone in the history of superannuation in this country,” David said. “The rise is anticipated to provide up to $500 billion in superannuation savings by 2035, contributing to an increase in the super account balances of working Australians and an even greater pool of capital that can be invested back into the Australian economy.

“The passing of the LISC is also a significant win for low income earners. It addresses a grave injustice for low income earners, who until now, paid as much if not more tax on their super contributions than on their wage income. The new law will provide a tax rebate of up to $500 for those Australians earning $37,000 or less. This means that the 15 per cent tax that low income workers currently pay on their concessional super contributions will be effectively abolished, making these contributions tax-free.”

Industry Super Network supports a superannuation system that is fair, equitable and provides adequate retirement savings for working Australians.

“We have long advocated for reforms that contribute to an adequate and equitable superannuation system, and these new laws will go a long way to achieving these outcomes,” David concluded.

For more information, contact Matt Linden at mlinden@industrysuper.com or visit the Supercharge Your Super Calculator.

Historic financial advice reforms a win for Australian consumers

The passing of the Future of Financial Advice Bill in the House of Representatives last week is set to significantly improve the retirement outcomes of industry super fund members.

In an historic move for Australian consumers, the Future of Financial Advice (FoFA) Bills passed through the House of Representatives last week.

These reforms will significantly improve the retirement outcomes of industry super fund members, and consumers more broadly, and ensure that they can receive high quality professional financial advice that is in their best interests.

Robbie Campo, Manager Strategy, said that while the reforms are moderate, they represent a comprehensive set of measures that will substantially deliver on the Government’s policy objectives to improve the quality of financial advice in Australia, strengthen investor protection, promote trust and confidence in the system, and encourage more people to seek financial advice.

“For the first time, financial planners will be required by legislation to act in the best interests of their clients, and sales commissions and other forms of conflicted remuneration will be prohibited,” commented Robbie.

“Importantly, the biennial ‘opt in’ requirement will ensure ongoing asset-based fees do not simply replicate trail commissions and unnecessarily reduce super savings.”

ISN supports the final proposal which will enshrine ‘opt-in’ in the law, but with the flexibility for financial planners and licensees to gain relief from ASIC if they sign up to an approved code of conduct.

“ASIC will provide relief to licensees and financial planners who are bound by an approved code of conduct, which obviates the need for the opt-in requirements,” said Robbie.

“This dual approach delivers protection for consumers and the opportunity for the financial planning industry to realise their objective to be regarded as a respected profession, an objective which is supported by industry super funds.”

Key aspects of the reforms

Best interests duty – requires advisers to act in the best interests of their clients. The duty provides some details around how an adviser can prove that they have acted in the client’s best interests by following a number of reasonable steps.

Opt-in measure – requires advisers to get consent from clients every two years to continue to charge ongoing fees for financial advice. Clients must be provided with fee disclosure in the intervening year. However, ASIC can exempt by class order relief any provider bound by an ASIC Approved Code of Conduct, which obviates the need for the legislative measure.

Annual disclosure – requires advisers to provide clients with an annual disclosure notice that provides information on  fees and services for the previous year, and also notifies them of their right to ‘opt-out’ of an ongoing advice contract.

Enhanced regulator powers – the Australian Securities and Investments Commission (ASIC) will have increased powers over the licensing and banning of financial planners with the capacity to refuse, suspend or ban a licence if an individual is deemed to have contravened or likely to contravene the obligations.

Ban on conflicted remuneration and commissions – under the new legislation, a range of conflicted payments will be banned, including commissions on investment products, commissions on risk insurance in MySuper and group risk products, soft dollar benefits and volume payments to employees and dealer groups.

Media Release: ISN congratulates Australian Government on new superannuation laws

Industry Super Network congratulated the Government on the passing of two historic new laws in Parliament that will significantly improve the retirement savings of working Australians: the increase of the Superannuation Guarantee to 12 per cent and the introduction of the Low Income Super Contribution (LISC).

Read the Media Release here.