This after new study suggests improved retirement outcomes
New research from the Financial Services Council (FSC) suggested that streamlining the transition to modern investment products for superannuation funds would result in consumers having $16bn more in their retirement by 2050, delivering $21bn in additional retirement income for Australians.
In a media release, FSC called on the government to act on these findings, advocating for a product modernisation framework that could enhance the government's fiscal position by nearly $1bn over the next decade and $21bn by 2050.
This includes additional government revenue of $2n by 2050 from superannuation tax receipts, with $700 million realised in the next decade, plus a $19bn reduction in Age Pension outlays by 2050, with $240m of these savings within the next 10 years as retirees enjoy higher superannuation balances.
The study, conducted by EY, suggested that a product modernisation regime would enable superannuation trustees and fund managers to seamlessly transition customers to modern investment options when it aligns with members' best interests, avoiding premature tax obligations.
“There is $132 billion invested in superannuation and investment options that could benefit from modernisation, impacting over 1.8 million customer accounts,” FSC CEO Blake Briggs (pictured above) said.
According to the report, an individual aged 40, with a current balance of $80,000, could see an additional $198,676 in their retirement savings by 2050 if allowed to transition from legacy to contemporary products without facing tax penalties or regulatory barriers.
“A product modernisation regime would support the government’s fiscal position, by lowering Government Age Pension outlays and raising new tax revenue, by almost $1bn in the next decade, without having to raise new taxes on superannuation consumers,” Briggs said.
The proposed framework aligns with the government's Your Future, Your Super reforms, addressing the challenge of consumers being stranded in historical products due to existing tax and regulatory constraints.
“The FSC supports performance testing of superannuation products; however, flaws in the current design of the Your Future, Your Super framework is having adverse consequences for consumers,” Briggs said. “Without a product modernisation regime, consumers will receive performance notifications, but personal tax consequences and the need for comprehensive financial advice remains, preventing consumers from taking action.”
The FSC report identified four key stakeholders likely to benefit from the proposed framework: consumers, the government, trustees, and regulators. These stakeholders stand to gain through increased net investment returns, reduced aged pension payments, operational efficiencies, and a more competitive industry.
Download the research report here.
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