SMSF risk should be examined by “son of Wallis”
The Australian Institute of Superannuation Trustees (AIST) has sought to persuade the Government to make the risk inherent in self-managed superannuation funds (SMSFs) a key issue in its forthcoming Financial Systems Inquiry.
In a submission to the Treasury dealing with the terms of reference of the so-called "son of Wallis" inquiry, the AIST has specifically referenced "an examination of the potential impact of Self-Managed Superannuation Fund failure on funding the age pension".
The submission, signed by AIST chief executive, Tom Garcia, then goes on to note the "usefulness" of SMSFs to some sectors of the Australian population but to also point to their regulation by the Australian Taxation Office (ATO) and the possible systemic risks.
"A feature of past financial system reviews was to examine major changes since the last review," the AIST submission said. "One such major change is the growth of Self Managed Superannuation Funds (SMSFs). Since June 2000, the amount of retirement moneys within SMSFs has grown from $74.9 billion to $531.5 billion in September 2013.
"AIST recognises the usefulness of SMSFs to sectors of the Australian population. However, given that SMSFs are now a significant component of the Australian retirement system, an examination of the regulation of SMSFs as well as systemic risk would be timely," it said.
The AIST submission also calls for the Financial System Inquiry to investigate the legislative and tax settings around annuities.
"AIST advocates that where appropriate, the legislative and taxation environment for retirement products and various sectors within superannuation must be on an equal playing field," it said. "AIST supports a review of the legislative framework for Annuities (forming part of the Post Retirement and Superannuation Sustainability Review), so that members are incentivised to take up all or part of their retirement benefit as an annuity."
However it added that, in saying this, AIST "recognises that members with amounts lower than the "Adequacy Benchmark" should not be penalised for taking part or all of their benefits as an annuity.
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