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Super choice off the agenda until financial advice improved.



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Senator John Cherry Australian Democrats Superannuation Spokesperson

February 11th, 2003 MEDIA RELEASE 03/070

Super choice off the agenda until financial advice improved

The Government’s superannuation choice of funds legislation will not provide retirees with appropriate safeguards unless there are improvements to financial advice and disclosure, according to the Australian Democrats.

Democrats’ Superannuation spokesperson Senator John Cherry said the survey released today by ASIC and the Australian Consumers Association raised serious doubts about whether the financial planning industry would provide independent advice to consumers about their superannuation.

“The combination of a low level of consumer understanding about superannuation and finance, and the lack of disclosure and independence among planners would be a disaster if superannuation choice of fund was introduced,” Senator Cherry said.

“Investors and retirees need to be confident that any financial planning advice they receive is independent and of a high quality. Life savings shouldn’t be risked because of poor industry standards.

“Yet the ASIC/ACA survey shows that in many cases, financial advisers failed to disclose trailing commissions and other charges; half of all financial plans were borderline or poor in quality; and 14% ignored a legal requirement to provide an Advisory Services Guide.

“The Democrats have consistently demanded that the introduction of choice in superannuation funds must involve adequate consumer protection, including access to guidance from a truly independent source.

“The ASIC/ACA survey findings follow research released last week by APRA showing that corporate and industry super funds consistently have higher investment returns and lower fees than retail funds.

“A 1% fee on super funds reduces final retirement savings by 22%, highlighting the need to contain the costs of funds and financial advisers.

“Yet super choice, in the absence of proper disclosure and genuinely independent advice, will see consumers shifted from employer-sponsored funds to retail funds which pay advisers higher commissions.

“Until the Government agrees to the Democrats demands for improved financial disclosure of fees and commissions, and the establishment of a genuinely independent superannuation consumer and education service, superannuation choice will clearly not be in the best interests of consumers,” Senator Cherry concluded.