The Australian Securities and Investments Commission (ASIC) released a draft report yesterday which proposes significant change to the way superannuation providers disclose fees and costs. ASIC believes the manner in which super companies present information about their products is complex and overwhelming to consumers. This makes it difficult for us to calculate the true costs and fees of a particular fund. Subsequently complicating the process of comparing different brands within the industry. Independent expert Darren McShane, who was responsible for a 2018 ASIC report on this matter, went as far as to conclude that the current system is so difficult that it is almost impossible for consumers to compare super options.
The industry’s approach creates a situation where most Australians have an ‘out of sight out of mind’ attitude towards their superannuation fund. With only 42% of Australians knowing their current super balance, the chances of them being aware of the fees their funds charge are slim at best. ASIC’s proposals seek to end the industry’s free ride and start making it easier for you to understand your super.
Key Changes
Simplify Presentation of Fees and Costs
One of ASIC’s key recommendations involves amending what super funds need to include on periodic statements they send to customers. As a result the following components would have to appear on the statements you receive:
- Fees deducted from your account
- Fees and costs deducted from your investment
- Total fees and costs you paid
This heading structure will provide you with information that is easier to understand and use. Additionally, it will also give you the ability to easily compare different funds. This is because these requirements will apply uniformly across the industry.
Streamline Fees and Costs Template
This proposes altering the structure of the fees and costs template that appears on a product disclosure statement (PDS). A PDS is basically a document that financial service providers must provide when recommending a product, e.g super funds. This is typically something you receive when you are considering a new fund. It will include information about the fund’s features, benefits, fees, and risks etc.
ASIC recommends changes to the fees and costs section of this document. As a result, super funds will have to include a new fees and costs summary designed by ASIC on the PDS they provide to consumers. The new version involves a streamline presentation of clear categories such as ‘administration fees/costs’ and ‘investment fees/costs’. This will merge indirect costs relating to either category into the summary to provide a more accurate indication of what you’re actually paying.
Conclusion
ASIC are currently in the process of inviting submissions in response to their draft report. They will consult the super industry and then respond to submissions later this year, with the final policy to follow. If you are experiencing difficulties understanding the current fees and costs system, the advice of a super lawyer may be of use.
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