ASFA wants bank guarantee changes

The Association of Superannuation Funds of Australia (ASFA) has called on the Federal Government to amend arrangements around the bank guarantee to give conventional superannuation funds competitive neutrality with self-managed superannuation funds (SMSFs).

ASFA has used its pre-Budget submission to deliver the message that it believes superannuation is currently being disadvantaged by the bank guarantee arrangements.

It points out, currently, the deposit guarantee is available at no charge to a SMSF that holds a bank deposit of less than $1 million while, in contrast, an Australian Prudential Regulation Authority (APRA) regulated superannuation fund with multiple members who have chosen a cash option and who each have less than $1 million in their account were required to pay a fee.

The submission said ASFA recommends that the fee arrangements be amended to provide regulated superannuation funds with the ability to look through their aggregate bank account holdings to individual members who have chosen a cash option.

“On the grounds of competitive neutrality with SMSFs and to avoid members being in effect encouraged to invest directly in bank accounts outside of superannuation, no fee should be charged for that part of a superannuation fund’s bank account attributable to members choosing to invest in a cash option,” it said.

The submission said such a fee arrangement would be totally consistent with the policy thrust of the measure and would not involve a guarantee in any way for an equity market linked investment.

It said given only a very small proportion of superannuation fund members choose a cash investment option within a fund involving an ultimate bank deposit holding by the fund, the costs to revenue of the suggested change to fees would be very modest.