ASFA calls on Govt for PDS overhaul

TheAssociation of Superannuation Funds of Australia(ASFA) will make a series of recommendations to industry regulators and the Federal Government on a standard level of disclosure for Product Disclosure Statements (PDSs) following a recent survey into consumer understanding of PDS documents.

ASFA chief executive Philippa Smith says without standardised disclosure of fees and charges, choice-of-fund will be “impossible to contemplate”, as it will be essential for consumers to compare products.

ASFA says it will brief the Government on the findings, and recommend that it, as well as theAustralian Securities and Investments Commission(ASIC), implement standard disclosure of PDS documents across the super industry.

Smith says the survey, conducted by social policy consultants Ageing Agendas, focused on how well consumers understand general information about funds, their ability to compare different fees and charges, and for them to differentiate between a variety of investment options.

As a result of the testing, ASFA will recommend the introduction of a comparison checklist for consumers and heavier warnings relating to the use of past performance data as an indicator of future performance.

ASFA says even despite increased warnings in the model PDS documents used in the testing, some consumers still missed it.

Other recommendations will include the introduction of a projected account balance and projected fee impact, and the replacement of industry terminology or jargon with plain language.

ASFA also calls for consistency in the layout and terms used throughout PDS documents, and that where percentages are used they should be complemented with dollar amounts. It has also suggested that a contact telephone number be on each page of the PDS.

The study also found that the now abandoned Ongoing Management Charge (OMC) was proved to be “more of a hindrance than a help, vindicating the criticism of it”.

ASFA supported the researchers replacing the OMC with a fee comparison table showing the impact of fees and charges over different periods. ASFA did note, however, that this approach would require ASIC to set agreed assumptions for different investment products.