Government moves on product consolidation

Proposed legislation has been released on product rationalisation for managed funds and life insurance industries that will ensure investors are not disadvantaged as they are transferred to newer products.

The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP, released the consultation paper today following the publishing of an issues paper on product rationalisation in June 2007.

“The proposed product rationalisation mechanism offers a specific solution to the range of issues involved in the process of removing outdated products and transferring investors into newer and better products,” Bowen said.

“Importantly, a proposed ‘no disadvantage’ test would ensure investors are not disadvantaged by product rationalisation.”

Bowen said the paper also outlined proposed tax relief for product rationalisation, with restrictions to protect the integrity of the proposed tax concession. The proposals and the introduction of a product rationalisation mechanism would benefit investors by enabling them to be transferred into modern products with superior features, at the same time removing the risks of error and fraud in the financial system by closing outdated legacy products, Bowen stated.

“The proposed solution seeks to strike a balance between protecting the rights and benefits of investors while offering product providers a practical and flexible process for developing product rationalisation mechanisms,” he said.

“The development of product rationalisation mechanisms must also look to reduce compliance costs for the Australian financial services sector,” Bowen stated.

Submissions in response to the consultation paper close on February 26, 2010.