Peter Burgess

The SMSF Association has lauded the Federal Government’s decision to fast track the implementation of a legacy pension amnesty.

SMSF Association CEO Peter Burgess says this is an early Christmas gift for over 17,000 SMSF legacy pension accounts that now have five years to commute their pension and take advantage of a flexible pathway to allocate associated reserve amounts.

“These newly registered regulations – Treasury Laws Amendment (Legacy Retirement Product Commutations and Reserves) Regulations 2024 – provide much-needed reform to retirees trapped in non-commutable legacy pensions, including legacy lifetime, life expectancy and market-linked income stream products.

“Considering the age of these superannuants, they now have a genuine opportunity to restructure their retirement savings effectively.”

Burgess says the decision to grant this amnesty is a tribute to the Association’s persistent lobbying on this issue over the past five years.

“These regulations represent a big win for the sector and the Association’s advocacy team, especially the decision to be make it a standalone policy priority and not be linked to other tax policies such as the proposed Division 296 tax.”

He says that while these regulations are a welcomed development, there is a lingering sense that some opportunities to further enhance the regulatory framework surrounding this measure may have been missed.

“In our submission on the draft regulations, we noted it was common practice for legacy pensions to cease rather than be commuted on the death of the primary beneficiary or on the completion of the payment term.

“We encouraged Treasury to consider the inclusion of an additional cap-free pathway to allow a pension reserve to be exited from the system where the pension recipient(s) has died.

“Unfortunately, this was not heeded so it appears an opportunity has been lost to quickly and efficiently eliminate these potentially large reserves.”

He adds that the Association also flagged the potential social security ramifications emanating from the regulatory changes.

“Notwithstanding industry’s recommendations for Treasury to work with the Department of Social Services to ensure these concerns were addressed, at this stage we’re not aware of any social security legislative instruments, or other supporting materials, that serve to alleviate any of these concerns.

“While we understand a legislative instrument to remove the social security ramifications is likely, without further clarification or developments on this front, concerns still linger that social security sensitive members may be negatively impacted by this recent development.”

These regulations, along with all other key legislative changes from 2024 impacting SMSFs, will be a feature of the SMSF Association National Conference 2025 next February. Held at the Melbourne Convention & Exhibition Centre from 19 – 21 February, attendees will hear the latest updates in depth from the experts.

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Peter Burgess

The SMSF Association says the framework outlined in the second tranche of the Government’s Delivering Better Financial Outcomes (DBFO) reform package lays the groundwork for reducing the cost and improving access to advice, but as is often the case, the devil will be in the detail.

The Minister for Financial Services, Stephen Jones, announced the package yesterday, stating it would ensure more Australians would have access to quality and affordable financial advice.

SMSF Association CEO, Peter Burgess, said there can be no argument reforms are needed to reduce the cost of advice and to open up new channels of professional advice to support the 15,500 existing financial advisers servicing the community’s financial advice needs.

“We have consistently argued that these new channels are urgently needed to enable more individuals to access quality advice to improve both their financial and mental well-being.

“Meeting this need has become even more evident when the growing number of baby boomers entering retirement is considered – many of whom cannot currently afford to get advice.”

Burgess said that considering the Government’s focus on creating a new class of adviser to provide safe and simple advice, it remains a mystery to us why the role other professional advisers, such as accountants, could play was still being overlooked.

“It was our contention that the Quality of Advice Review neglected the significant role accountants can play in addressing the growing advice gap, and the Government is perpetuating this oversight.

“By giving accountants a defined advice role, it will further support consumers to access the advice they need when they want it from their choice of trusted adviser.”

He said new educational pathways were needed to not only ensure the sustainability of the financial planning sector, but to ensure the future financial advice needs of all Australians could be met.

“The success of this model will depend on ensuring that the education requirements for the new class of adviser truly provides a pathway to becoming a financial adviser.

“We welcome the opportunity for all AFS licensees to employ the ‘new class’ of adviser and support more individuals on their pathway into a rewarding and fulfilling career.”

He added that many consumers needed point in time advice, often driven by life events, so modernising the best interest duty provided certainty to the sector that they could meet this need by providing advice on a single topic or limited scope of advice.

Burgess said the professionalism that now characterised the advice sector was a credit to its practitioners, providing the foundation for the sector to now expand so that it could meet the advice needs of a growing number of Australians in an affordable way.

“The Association looks forward to working with the Government to ensure the right balance between opening up advice to more Australians is achieved without surrendering important consumer protections.”

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Peter Burgess

The self managed super fund (SMSF) sector has notched up a significant milestone following the release of the Australian Taxation Office’s (ATO) September 2024 quarter SMSF statistics which show total SMSFs assets have surpassed $1 trillion for the first time.

SMSF Association CEO Peter Burgess hailed the ATO’s quarterly statistics as a landmark achievement for the sector, noting that while the figures are estimates, they underscore the confidence Australians place in SMSFs. As at 30 September 2024, Australians have entrusted approximately $1.02 trillion of their retirement savings to SMSFs – a powerful testament to the value of “choice” and the benefits of SMSFs.

“SMSFs can provide the ultimate level of control and flexibility which in-turn empowers and encourages greater level of engagement.”

“This extra flexibility and control can manifest itself in many ways including investment flexibility, estate planning flexibility and the ability to structure the fund in a way which best suits the needs of fund members.”

“It’s always been the Association’s mantra that SMSFs are not for everyone. But for those individuals who want to take direct control of their retirement savings, whether in the accumulation or decumulation phase of superannuation, they have proved a very effective vehicle.

Burgess said the sector had thrived despite a long-running campaign that asserted SMSFs were costly, complicated, and delivered lower investment returns compared with their APRA-regulated counterparts.

“These were criticisms that the sector – and the Association – took extremely seriously, so it was gratifying when research commissioned by the SMSF Association showed that an SMSF with net assets of $200,000 can be competitive in terms of costs and investment returns compared with APRA funds.”

Burgess said the Association was proud of the sector’s remarkable evolution, noting the concept of small, member-controlled superannuation funds emerged in 1985 under the term ‘excluded funds’ before SMSFs were introduced in 1999 alongside a more comprehensive regulatory framework.

“Over nearly four decades we have seen the emergence of a dedicated cohort of advisers who have played a critical role in guiding SMSF members through their own unique superannuation journey. The fact that every inquiry into superannuation has given our sector a clean bill of health is testimony to the professionalism they bring when advising their clients.”

This significant milestone will be celebrated at the SMSF Association’s 2025 National Conference, being held at the Melbourne Convention and Exhibition Centre from February 19 -21, where the theme, ‘Collaboration: Unleashing Collective Potential,’ will highlight the importance of working together to explore and shape what the future holds for the sector.

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Neil O’Grady

Confusion about what a financial planner actually does appears to be the main barrier to seeking financial advice, according to Connecting with Consumers, a new report published by financial services practice development consultants, BusinessBlades.

Neil O’Grady, Founder and Co-Director of BusinessBlades says the report, which was the result of a nationwide survey canvassing the opinions of 4,000 consumers, revealed that people are opting to look after their financial affairs themselves. “It usually takes a life event, such as receiving an inheritance or redundancy payout, to prompt them into approaching a financial planner,” he says.

One third (33%) of those surveyed chose to look after their own finances, a further 27% said they thought they didn’t have enough money to invest to make visiting a financial planner worthwhile and 22% said they would only seek financial advice following a specific event.

“Interestingly, only 9% of respondents said lack of trust was the key reason for not seeking the services of a financial planner,” Mr O’Grady says.

One of the most alarming trends apparent from the research, according to Mr O’Grady, was that only 5% of respondents said they would go to a financial planner to establish goals and develop a plan to achieve these goals. “Even more alarming is that only 2% said they would go to a financial planner for personal insurances and only 12% would seek investment advice from a financial planner.”

Mr O’Grady says these statistics make it apparent that consumers haven’t grasped the scope of services offered by financial planners and don’t understand the benefits of seeking financial advice. “Financial planners need to look at their value propositions differently,” Mr O’Grady says.  “As an industry, we have to look at how people perceive what we do. We have to do more work on the scope of services offered and the benefits people are going to get out of using them.  We have been talking about value propositions for years; now is the time to take action.”

Mr O’Grady says the research also revealed that consumers want singular, rather than holistic advice. “Consumers want advice which is specific to an identified need, such as retirement or coming into inheritance,” he says. “If you want to engage with the 80% of Australians who aren’t currently using a financial planner, talking up holistic advice is not going to win them over.”

Mr O’Grady suggests advice practices and institutions may need to look at how they can offer single-issue advice. “It may be about developing a series of life-stages packages that help clients meet the specific needs of each life stage,” he says. “The process of repositioning advice businesses doesn’t have to be painful. It may be just a slight tweaking or modification that helps provide real clarity to consumers about who the financial planner is, what a financial planner does and how they can help.”

Click here to download a copy of the Connecting with Consumers research report.

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These latest results shouldn’t come as a huge surprise to anyone, given that they confirm a trend that’s been in place for a while. But rather than be overly alarmed, we believe there’s a great opportunity for the industry to respond.

According to BusinessBlades, it’s an opportunity for advisers and their dealer groups to work together in partnership to re-engineer and improve client engagement.

http://vimeo.com/67616074

If you’d like to know more about BusinessBlades, visit their website at www.businessblades.com.au

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