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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Josh Callaghan

Canstar has released 2018 Superannuation Star Ratings research, identifying 7 super funds for offering outstanding value to Australians.

Australia’s biggest financial comparison website*, Canstar has released its 2018 Superannuation Star Ratings research, highlighting the super funds offering Aussies outstanding value and investigating the impact that default life insurance cover could make to Aussies’ retirement balances.

Insurance in super can act as a safety net for many Australians, offering a level of protection in the instance they or their loved ones need to draw upon it. However, insurance held through super can represent a significant cost over a lifetime and can reduce a person’s overall retirement benefits.

Canstar has calculated the impact to your nest egg of opting out of default life insurance, finding that forgoing life insurance could potentially increase your super balance by over $200,000 at retirement.

However, Canstar’s superannuation expert warns of the importance to carefully weigh up the savings of opting out of default life insurance against the peace of mind offered by the insurance, particularly at different life stages.

Canstar’s superannuation expert, Josh Callaghan explains, “Many Australians with default life insurance cover in their super may not even realise they are paying for the privilege, how much they are paying for it or what is included in the cover. If their circumstances don’t warrant such cover, it could be needlessly eating away at their retirement nest egg.”

Canstar’s investigation shows a 25-year-old blue-collar non-smoking male starting with a $30,000 superannuation balance and an annual income of $60,000 could retire with up to $244,676 more at age 67 if he opted out of the default insurance within his super compared with if he kept it.

This balance was deduced using the maximum annual default death and total permanent disability insurance premiums charged by those considered in Canstar’s 2018 Superannuation Star Ratings.

“Sacrificing life insurance to retire with an extra $200,000 sounds very tempting, especially when you’re young with fewer responsibilities. However, finding yourself underinsured later in life when you have significant financial commitments can be a serious concern and shouldn’t be overlooked,” explained Callaghan.

Consider the profiled white-collar non-smoking male who decides to opt out of default insurance at age 21 to save money and boost his retirement balance. If he then decides to take up insurance when he had a mortgage and family to contend with at say age 35 those insurance free years could mean an extra $25,000 in his retirement nest egg. This isn’t as significant as the possible $244,676 savings if he opted out for life, however it will mean from age 35 onwards he’s got cover to protect him and his family.

“Keep in mind that if you do opt out of the default insurance, it’s unlikely you will be able to opt back in with your current super fund. You will instead need to apply for tailored insurance or if you specifically want default insurance, you would be required to switch super providers,” noted Callaghan.

“It is important to remember there are many factors to consider when choosing a super fund in addition to the insurances on offer, such as past performance, ongoing fees and the advice on offer.”

If you’re unsure of whether you are paying for a default life insurance policy through your super fund, check your super statement or ask your fund directly to understand what you may be covered for.

To give you an insight into the likelihood of you already having default insurance through your super, out of the 63 superannuation accounts rated in Canstar’s 2018 Superannuation Star Ratings (for a 25-year-old), 35 funds offer default death cover, 33 offer default total permanent disability and only 11 offer default income protection.

Who offers outstanding value when it comes to superannuation?

After researching and rating 63 superannuation accounts, Canstar has revealed seven 5-Star Rated recipients for Outstanding Value in its 2018 Superannuation Star Ratings.

Canstar’s 2018 Superannuation Star Ratings are calculated using a sophisticated and unique ratings methodology that considers performance, fees and product features across superannuation products. Ratings range from one to five stars, with five star-rated products being assessed by Canstar as offering outstanding value to consumers.

Following are the seven 5-Star Rated recipients as rated by Canstar, sorted alphabetically by fund name.

• AustralianSuper
• CareSuper Personal Plan
• Energy Super
• HOSTPLUS Personal Super
• StatewideSuper Personal Plan
• Sunsuper for Life
• VicSuper FutureSaver

These 5-Star Rated recipients have demonstrated robust net investment returns across the previous five years, as well as competitive product offerings, specifically when it comes to financial advice, tools and education, member access, contribution methods and beneficiary options.

Learn more about Canstar’s 2018 Superannuation Star Ratings and methodology.

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CANSTAR analysis has found that the average number of ASX companies on financial institutions’ acceptable securities lists has risen quite significantly since the height of the GFC, indicating that institutions are comfortable taking on a higher level of lending risk. “One broad way in which a financial institution can reduce margin lending investment risk is to reduce the number of acceptable securities,” said CANSTAR Research Manager, Mitchell Watson. “CANSTAR analysis has found that just prior to the GFC, the average number of ASX securities on the acceptable securities lists of the financial institutions we rate was 520. This number had plummeted to an average of 390 by December 2009. Even by December 2012 the average number of securities was only 419, but by December last year that number had risen to 446 securities. This perhaps indicates a more optimistic economic outlook.”

While the average number of acceptable securities overall saw a marked decline, the average number of ASX 200 companies on the acceptable securities lists remained resilient throughout the GFC. Page 2 of 3

CANSTAR today released its margin lending star ratings report, awarding five stars to outstanding lenders in two profiles – Share Investor and Managed Fund Investor. CANSTAR margin lending star ratings is a consumer-friendly benchmark that compares both the price, including the interest rate and fees and charges, and features, including the maximum LVR, the number of shares/managed funds offered, repayment options and other account features. Five-star lenders are considered to offer outstanding value for money. There are three five-star products in each of the Share Investor, and the Managed Fund Investor profiles.

Share Investor profile

Within the Share Investor profile, ANZ, CommSec and St George achieved a five-star rating, all maintaining their position from last year.

ANZ’s rating is driven by its acceptable securities score, providing lending on both the highest number of ASX 200 stocks and the highest number of stocks overall. Currently, ANZ provide lending on more than 700 stocks, which is significantly higher than the industry average of 446 stocks.

CommSec maintains superior product features with good direct client services including an unlimited transaction history, “what-if” calculators and weekly newsletters. They notify clients within 24 hours when in buffer. They also offer trading in options and warrants.

St George offers investors a good balance between features and price. On the features front, St. George offers periodic statements, “what-if” calculators and the ability to trade options among many other features to its clients.

Managed Fund Investor profile

Within the Managed Fund Investor profile, CommSec, CommSec Adviser Services and St. George all achieved a five-star rating.

Both CommSec and the advice model, CommSec Adviser Services, maintain superior product features, with the Adviser Services model providing a wider range of acceptable securities than the purely DIY model.

St George achieves the top score for acceptable securities. They have an extensive acceptable securities list with lending offered on 1,811 funds. This is significantly higher than the industry average of 1443 funds. They also offer a buffer margin of 10%.

Consumers can download the full Margin lending star ratings report on www.canstar.com.au

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CANSTAR issue advice to shop around ahead of RBA rates review.

Commenting ahead of the RBA announcement, Mitchell Watson, Research Manager for CANSTAR said:

“Last week Reserve Bank Governor Glenn Stevens gave a speech in which he called the end to the investment growth phase of the mining boom. He stated that there is no natural successor to that growth at the moment and monetary policy may need to encourage non-mining investment. He also stated that the current inflation outlook provides scope to ease further. Markets do seem to have interpreted those comments as a likely call to action this month.

It is interesting to note, though, that over the past twenty years interest rates have been lowered during only one election campaign period; in 2001 when rates were lowered by 0.25% two months in succession. In other words, only one of the past seven election campaigns has seen an RBA movement downwards on rates.

The recent fall in the value of the Australian dollar against the greenback has taken some pressure off the RBA, however Glenn Stevens did note last week that we need to raise business confidence and raise household confidence from their current levels in order to find that mining boom successor.

Irrespective of the RBA decision, consumers should still question whether they are getting the best deal available for their borrowing needs. On our database for example, the average standard variable rate is currently 5.71%, but the lowest variable rate on our database currently is 4.74%. Now, a mortgage holder with a $300,000 mortgage over 25 years who did their own research and switched from an average rate to the lowest rate could potentially save themselves more than $170 per month and more than $50,000 over the life of their loan.

So the message for all borrowers is to know your rate, the features and benefits of your loan and shop around.”

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“This is the first financial year in which the Government’s private health insurance rebate has been means tested,” says CANSTAR Research Manager, Mitchell Watson.

“While some consumers claim their 30% rebate when they submit their tax return, many people claim the rebate in the form of reduced monthly premiums. If they haven’t realized that they will be caught by the new means testing – and haven’t reduced the amount of rebate they are receiving – they could be in for a tax bill.”
 

Means testing 
The income test threshold kicks in for families at $168,001 and is applied at progressive rates up to $260,001. The amount of rebate a family is entitled to depends on age as follows:

Based on CANSTAR’s research of average annual premiums for a family package (hospital plus extras) policy on a state-by-state basis, CANSTAR calculates that high earning families who were previously receiving a 30% rebate and have not manually reduced this amount could be in for the following liability at tax time:
Traps
Mr Watson observes that the income test for the private health insurance rebate involves more than just taxable income.

“Some families could get caught out, assuming that they won’t trigger the reduction in rebate because their combined taxable incomes are less than $168,000,” he says.

“The income test that applies for this rebate is more comprehensive though – it also includes reportable fringe benefits, net investment losses and reportable superannuation contributions. When those items are all added in, families might discover thattheir total earnings are higher than they thought!”

Tips
CANSTAR urges consumers to check their likely income levels. “The tax office has some excellent information on their website to help taxpayers calculate their income in relation to the rebate,” says Mr Watson.

“It’s worth checking this out because the rebate is a sudden death thing: one dollar of income over the threshold and you could suddenly be looking at several hundred dollars-worth of tax liability.”

Mr Watson also encourages consumers not to drop their cover. “The median waiting times for elective surgery in public hospitals can significantly impact on patients’ quality of life,” he says.

“There are several thousand unfortunate people who stay on the waiting list for over a year. Our public system is great if you have a life threatening emergency – but you do not want to be uninsured when it comes to elective procedures.”

For savvy shoppers there is money to be saved.

“Each year we undertake an annual comparison of health insurers around the country; our most recent analysis compared over 10,000 quotes from 1,200 products and compared them against 11 profiles across seven states and territories,” says Mr Watson.

“There is no one-size-fits-all policy and consumers will all have different insurance needs. Premiums for the same level of cover do vary between providers though – it is worth doing some research.” 

Consumers can download the CANSTAR health insurance star ratings report on www.canstar.com.au. The report is an immensely valuable resource for those who are serious about comparing health funds and products to determine the best value for their health insurance dollar.

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