Further regulatory change in super inevitable


By Wouter Klijn

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Further regulatory change to Australia’s superannuation system is inevitable as governments worldwide are looking to find new ways to ensure the sustainability of their pension systems, according to professional services firm EY.

“Given the importance of superannuation to Australians, and the compulsory nature of the system, further regulatory change and focus is inevitable,” EY global pension leader Graeme McKenzie said yesterday.

“This is evident in the release of the Financial System Inquiry’s interim report.

“The industry should be taking this opportunity to work with government and regulators to develop a strong framework for that will ensure the future health of the system.”

McKenzie said more work was required to boost consumer confidence in the system.

“We need to see an improved focus on members to ensure their needs are being met both before and after retirement,” he said.

Yet, he also said he believed the focus should be on bedding down the recent changes to the Australian super system rather than on further reform.

“It would be wise to stabilise what we’ve got,” he told financialobserver.

“There is not a huge gap in the Australian system at the moment and we should focus on getting the APRA (Australian Prudential Regulation Authority) prudential standards operational, to get them up and running.”

McKenzie made the comments on the back of a report, “Building a better retirement world: insights for better outcomes in the global pension and retirement market”, released by EY today.

The report is based on more than 80 interviews with representatives of governments, regulators and pension industry executives in 18 countries, including Australia, across the Americas, Asia-Pacific region and Europe.

Survey participants overwhelming agreed change was needed to rebalance pension and retirement systems.

“Increasing fiscal pressure on budgets due to ballooning health and pension costs and the demands of baby boomers wanting to maintain a dignified lifestyle in their retirement means this is an increasing issue around the world,” McKenzie said.

“The increasing importance of pension and retirement systems to ensure dignified long-term retirement requires an improved quality of regulation, supervision, governance and transparency to align to higher consumer expectations.”

But these challenges also provided opportunities for companies servicing the sector.

“Today, a fund can have potentially a relationship with a member for 60 years. There is the potential there to offer them services other than super,” McKenzie said.

He also noted opportunities for service providers and administrators to export their skills overseas.

“People look at Australia as a leader in super thinking,” he said.

“We can be more active in the global scene, especially with regard to our closer neighbours in Asia, where many countries are trying to build their own system.”

Finally, there were opportunities in building post-retirement products, as flagged in the Financial System Inquiry report.

“There seems to be a crying need for a product that is well understood and value for money,” McKenzie said.

Although he added many funds and product providers had new products in the pipeline.

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