It is time that APRA, without ambiguity, allowed superannuation funds to offer advice which consider the totality of their members’ situations, argues PAUL SCULLY, a trustee director of State Super NSW.
Superannuation is an area that attracts its share of controversy and passion from time to time, not the least because we are getting older as a society and many of us are at or approaching an age when superannuation assumes an almost visceral importance. Advice is one such aspect of modern superannuation. What kind of advice should funds make available to their members? How should this advice be funded? APRA’s 2001 paper on the sole purpose test cautions that “if…..broader advice is offered, it would be inappropriate for the cost to be borne by the fund”.
Now let’s be clear about APRA having an opinion. It may be helpful to know what the regulator is thinking and as a general guidance note, and it may sometimes act in practice as if it had the force of law, but it is not law; it’s an opinion only. There are many others better placed than I am to discuss just what the law is. I have a more basic question: is the APRA view reasonable?
At the outset, I need to make clear that the fund’s intention is to allow and hopefully ensure members make informed decisions. That said, if it turns out that the law does restrict the scope of advice, then that would seem a perverse outcome. All of us, Government, regulators, trustees, fund executives, all manner of industry participants want fund members to make well-informed decisions about choice of fund, contributions levels, insurance and all the rest of it. In making informed decisions people surely need to look at their overall circumstances and not superannuation in isolation.
As always, a bit on the nomenclature: superannuation, pension and retirements income funds, schemes and systems can be used pretty well interchangeably for this discussion; the lump sum generated by a lump sum-only fund gets converted to income in full or in part at some stage one way or another.
Superannuation used to be about generating an income in retirement but you don’t necessarily have to be retired to enjoy the fruits of superannuation in a transition-to-retirement world. Sooner or later though, working or not, funds accumulated through superannuation will come to fund old age living either in full or in part. This is the fundamental purpose of superannuation: it is there to ensure as best we can, in conjunction with other measures, that we can live “reasonably comfortably” and purposefully in old age and can afford the vital services such as healthcare that will maintain us. And, along the way should tragedy befall us, that we are in position to deal with our needs in this event, or our dependents are in a position to deal with theirs’ through insurance-related benefits.