Government has only days to stop RG97 super fund ‘fee-asco’

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The Government has only days to step in and stop a ‘fee-asco’ in super fund disclosures.

New fee and cost disclosure rules for super funds apply from 1 October, under ASIC’s Regulatory Guide 97 (RG97).

Industry Super Australia says these new fee disclosure rules are “fundamentally flawed”, create risks for investors and give “substantial advantage” to some super funds over others.

Related: ‘Significant changes’ to super fund fee disclosure coming, says ASIC

An analysis of the new RG97 rules by SuperRatings, commissioned by ISA, finds that the different disclosure requirements for platforms could mean investors are mislead to believe a super fund using platforms is cheaper when it was actually more expensive than other super funds. The analysis finds a non-platform super fund could look four times as expensive compared to a platform-using fund, even when it is actually has lower costs.

Another example has a direct infrastructure investment (which Industry Super Australia has said industry funds view as a priority) could appear over twenty times as expensive as a listed investment, despite the listed investment being costlier.

Industry Super Australia (ISA) says a consumer investing through a super fund that uses investment platforms they will need to go through multiple Product Disclosure Statements to calculate fees and costs. Whereas a super fund that doesn’t use platforms will disclose all fees and costs in one place.

“It appears ASIC is optimistically relying on the wealth management industry (including bank-owned super funds) to not make direct comparisons between super funds that utilise platforms or not – and for consumers to work out for themselves the combined effect of multiple disclosure documents,” said ISA.

ISA Public Affairs Director Matthew Linden said: “Over $500 billion is invested through platforms, which are typically owned by banks and wealth management groups and used by financial planners”.

“The new super rules are more likely to mislead consumers than help them,” he said.

“It is time for the Government to step in, otherwise super fund members across the country could be misled.”

“This is a litmus test for the Government that claims to be on the side of super fund members, or favouring the retail and bank-owned super funds.”

Industry Super Australia is calling on the Government to defer the implementation of RG97 until it can “can guarantee full disclosure by reversing the exemptions on platforms and intermediary trusts investing in real property or infrastructure”.

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