MySuper bill 'mandates flipping', warns Colonial First State
A section of the Government's MySuper bill, as currently drafted, could actually mandate the practice of "flipping", according to Colonial First State (CFS).
In a submission lodged with the Parliamentary Joint Committee reviewing the MySuper legislation, CFS has pointed to the manner in which the Cooper Review recommendations had sought to eliminate the practice of "flipping" superannuation fund members into more expensive arrangements.
It said that while some elements of the MySuper bill ensure members are not required to be compulsorily "flipped" to a higher MySuper product fee and different insurance premium rates, section 29VB would prevent former employees from accessing the discounted administration they may have enjoyed prior to ceasing employment.
"The effect of this section is to mandate the practice of 'flipping' for these employee-members once they cease employment," the submission said.
"The discounted administration fee as negotiated between the employer and trustee can no longer be charged to the former employee, meaning the trustee must apply the standard (higher) MySuper administration fee."
The CFS submission said the section was inconsistent with other sections of the legislation and it was unclear why it had been drafted.
"We are concerned that members will be negatively impacted by this construction of the law," the submission said.
"In the absence of the ability to 'retain' former employees under their existing fee and benefit structure, the impact of flipping members to a higher fee and potentially higher insurance rates should not be underestimated."
Recommended for you
AMP is to launch a digital advice service to provide retirement advice to members of its AMP Super Fund, in partnership with Bravura Solutions.
Unveiling its performance for the calendar year 2024, AMP has noted a “careful” investment in bitcoin futures proved beneficial for its superannuation members.
SuperRatings has shared the median estimated return for balanced superannuation funds for the calendar year 2024, finding the year achieved “strong and consistent positive” returns.
The second tranche of DBFO reforms has received strong support from superannuation funds and insurers, with a new class of advisers aimed to support Australians with their retirement planning.
