Super choice or Hobson’s choice?
Yesterday’s deal between the Federal Government and the Democrats, that will see the Government’s stalled choice of super plans passed in the senate, will not aid the consumers it’s supposed to benefit according to the Federal Opposition and some industry bodies.
“Deregulation that requires a consumer to choose a fund based on inadequate disclosure in a 60 to 80 page document, without appropriate additional protections in place and combined with low levels of financial literacy… is extremely dangerous for consumers,” Labor superannuation spokesperson Nick Sherry says.
Sherry questions claims by the Government, Democrats and the Investment and Financial Services Association (IFSA) that these measures will result in lower fees.
“If consumers need to seek additional advice they will pay more, not less. This was the experience in the UK when the Thatcher Conservative Government introduced so-called ‘Choice’,” Sherry argues.
However IFSA chief executive officer Richard Gilbert backs the Bill saying it provides consumers with sovereignty over their superannuation and gives them a fairer deal.
“Super choice of fund legislation will further increase competition in the industry and lead to downward pressure on fees and charges,” Gilbert says.
However both the Association of Superannuation Funds of Australia (ASFA) and the Australian Investors Association (AIA) are more cautious in their assessments.
ASFA chief executive officer Philippa Smith says any celebrations regarding choice, having been stalled in the senate for a number of years, must be viewed circumspectly full consumer protection and education processes are in place.
“Choice is definitely good but for choice of fund to be effective and beneficial to consumers, we need three essential elements in place: education, disclosure and protection.
“Unless consumers can understand and compare the price tag of superannuation products, informed choice and effective competition are not likely to occur. Indeed the average costs to consumers could increase,” Smith says.
In addition, the ACA while supportive of the Government's intention to regulate against ‘kickbacks’ would also like to see warnings highlighting issues relating to ‘churning’ on standard choice forms for employees.
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