||Issue No. 263||13 May 2005|
A Fistful of Dollars
Interview: Fortress NSW
Unions: Fashions Afield
Industrial: Pay Dirt
Politics: Infrastructure Blues
History: Big Day Out
International: Making History
Economics: The Fear Factor
Review: The Robots Revolt
Poetry: The Corporation's Power
The Locker Room
Combet Launches Shark Attack
ACTU secretary Greg Comber says the commissions are a major threat to industry super funds, as they refuse to pay planners for bringing them in business.
"The ACTU is worried that when the new 'superannuation choice' laws take effect from after 1 July unscrupulous financial planners will move their clients super from one fund to another -- in processes known as mis-selling and churning -- to gain more commissions and fees," Combet says.
"Higher fees will eat into employees super accounts and ultimately leave them worse off when they retire.
"The Federal Government should move to prohibit commissions on super guarantee contributions. This will remove the incentive for unscrupulous financial planners and ensure super fund members know how and what they are paying for. "
The ACTU is concerned that the way the Government's superannuation choice system is being implemented is deeply flawed and believes that problems that need fixing include a poor fee disclosure regime and inducement for employers to shift funds to a retail fund.
Current rules mean super funds only need to disclose the first year of fees. This will lead to "honeymoon rates" like those that credit card companies advertise. We all know that in the long-term customers ending up paying more. It is ridiculous that a 40 year investment can be sold on the basis of a one-year honeymoon rate. Instead there should be a requirement for clear fee disclosure. All super funds should disclose their fees over a minimum five-year period and explain the effect of fees over the long term.
Inducements for employers. In effect the choice legislation will be choice for employers not employees, with banks and financial planners able to offer employers inducements such as payroll or advice services to make their fund the default fund for employees. Also, employers may be offered reduced interest on their business loans or better credit arrangements & APRA will have difficulty regulating these practices even though offering such inducements is not lawful.
Combet says one solution is to properly resource APRA to monitor the commercial relationships between banks, financial planners and the small minority of unscrupulous employers who might use their employees super as leverage to lower their own business banking costs.
"Lack of knowledge among many workers will prevent people from making an informed choice," he says. "Many will be driven by what the default fund is at their workplace or perhaps rely on advice from their financial planner or accountant whose advice may then be driven by which fund pays the highest commission.
"The Government should invest in a long-term education campaign directed at super fund members. The current proposals are insufficient with the Taskforce established to run the education campaign estimating it will take ten years to get through to most people.
"The main goal must be to ensure that working Australians have access to low cost superannuation that enables them to retire with dignity and in comfort rather than be forced to work until they drop.
"Unions are proud of the fact they worked with the Labor Government to introduce universal superannuation in 1985. At that time only 39% of employees had super, now 97% of the workforce has super."
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