24th October 2012 – Financial Counselling Australia (FCA) congratulates the Federal government on their $10 million investment towards advancing the interests of consumers in the superannuation system.
By providing seed capital for the establishment of a not-for-profit Superannuation Consumer Centre, the government is developing the framework to provide superannuation-related education and advocacy for all working Australians. Executive Director of FCA, Fiona Guthrie, welcomes the initiative as providing consumers with a much-needed means to demystify the retirement savings system. The Centre will also give consumers a strong and independent voice in the development of superannuation policy, regulatory reform and industry practices.
“Our superannuation system is praised as being one of the most well-structured and robust retirement platforms in the world and is currently worth around $1.3 trillion,” says Ms Guthrie. “That amount is expected to almost quadruple over the next two decades.
“Despite the value however, many consumers are confused about the contribution, investment and insurance options open to them. This lack of engagement is evidenced by the fact that there is currently $17 billion sitting in lost and unclaimed superannuation accounts around the country. Many Australians also lack the knowledge to really take advantage of what is on offer and have a “set and forget” attitude towards their super. We simply don’t realize just how significant a small improvement in return, or small reduction in fees, can be over the long term. (See box at end for an illustration.)
FCA also notes that as the industry grows in value it poses an increasingly attractive target for organisations and individuals eager to find a profit. “Of course the vast majority of financial services companies and financial advisers are working in the best interests of their clients, but wherever there is a large pool of money there will also be an attraction for less-ethical people who want to line their own pockets with the retirement savings of others” says Ms Guthrie. “Having an independent consumer voice in this space, will make it less likely that scammers will get a foothold.”
The Government’s funding is contingent on matching funding from the superannuation industry. This funding will provide the new Centre with a capital base, the earnings from which will fund its operations on an ongoing basis. This innovative funding mechanism will ensure the Centre’s longevity and importantly, its independence. FCA understands there is strong industry support for the establishment of the Centre and a willingness to provide matching funding. FCA also congratulates the industry on having the foresight to do this.
Along with Minister Shorten, the FCA commends the work of Jenni Mack, Allan Moss, Steve Bracks, Jo-Anne Bloch, Tony D’Aloisio, Philippa Smith and Jeremy Duffield in creating this important consumer initiative.
|The difference a fee can make …
All things being equal, choosing a superannuation fund which charges 1% less in fees per annum could save a 25 year old on an average income approximately $60,000 in today’s dollars. Unfortunately, the majority of workers would not know what current level of fees they are paying.
Calculated for a 25 year-old on $65,000 per annum in a balanced superannuation fund, receiving 12% superannuation guarantee contributions over 35 years. www.moneysmart.gov.au – calculator
People in financial difficulty can contact a free and independent financial counsellor on 1800 007 007.
For further comment please contact:
Executive Director, FCA
Ph: 0402 426 835