MySuper and Transparency in Superannuation - Essay Example

MySuper and Transparency in Superannuation Insert Name Course, Class, Semester Institution Instructor Date An Overview of MySuper and Superannuation Introduction Retirement benefits have taken on a new look over the years. In Australia, retirement benefits come is an arrangement referred to as superannuation. Superannuation fundamentally concerns itself with the capacity of people to access money upon retirement. The arrangement, which is encouraged and supported by the national government, is a tax benefit scheme in the sense that the superannuation funds are taxed at 15% which is much lower compared to if it was taxed as part of normal income (Australia, 2010). Currently, the government requires that all employers contribute 9% of the funds of all employees between the ages of 18 and 70 in to the superannuation fund. This is intended to rise to 12% as part of the government’s endeavors to raise the standards of living and the overall quality of life between the year 2013 and 2020. Superannuation funds were a result of pre-1992 arrangements to reduce dependency and imbalances in the economy, after analysts had predicted a serious demographic shift in the population of Australia and other western countries. Superannuation, which was an outcome of a tripartite agreement between employers, the government and trade unions, is designed to improve post-retirement quality of life. A new cut-rate and simple product of superannuation which takes the place of the default funds has been instituted, and it’s referred to as MySuper. The Salient Features of MySuper On the third day of November 2011, the MySuper legislation was brought before the legislators. The main intention of the MySuper legislation was to create a wide range of effortlessly analogous and relatively affordable products which would focus competition on net costs and return (Colquhoun, 2012). On the 14th day of February 2013, Sun Super became the first superannuation fund to be recognized as a legally identified MySuper authority. The MySuper arrangement was announced by the national government of Julia Gillard for the superannuation industry of Australia. The salient features of MySuper are as outlined below. A single investment option The most striking feature of MySuper is the actuality that it only upholds a single investment option for the superannuation funds. While this has been the main point of critiquing MySuper, there are adjustments that have yet to be effected with the aim of correcting the faults. Currently, the arrangement is in such a way that, due to the changing risk attitudes associated with age, the superannuation funds have introduced a lifecycle along which people can adjust investments. An easily comparable fee structure The fees payable with regard to MySuper is easily comparable and highly flexible. This makes the scheme offer a wide range of payment options. This is aimed at mitigating inconveniences on the part of the beneficiaries. Critics have acknowledged this as a selling point for the scheme. Restrictions on how counsel is provided and how such counsel is paid for Professional advice is usually provided with regard to investment options and decisions. When a person is seeking such advice from the analysts and professionals, they have access to guidelines and instructions restricting how such counsel and professional guidance is provided and rewarded. This makes the whole process transparent and understandable to all stakeholders. Again, this eliminates inconveniences and upholds efficiency. A minimum level of insurance cover Insurance schemes are availed to various funds as part of securing the investments made, or those intended to be made. When this is the case, MySuper has a requirement that there should be some form of insurance cover relating to the investment arrangements. Primarily, insurance here is meant to minimize losses and chances of conflict in the event that unforeseen uncertainties occur in the line of investment (Gruen, & Wong, 2010). Rules governing fund governance and transparency Transparency, accountability and responsibility are governed and guarded by some rules that must be strictly adhered to. Non compliance with such rules may cause loss of MySuper authority, a process that is not reversible at all. No entry fee The exclusion of entry fees makes it clear that all superannuation funds can seek MySuper authority. Additionally, the absence of admission fee makes the arrangement transparent, free and fair to that entire endeavor to access MySuper products. A total ban on all hidden fees Previously, there were a number of mysterious fees, which would later frustrate the individual beneficiaries. The legislation relating to MySuper has totally laid a ban on such fees. This means that, when a person or a fund is selecting what to invest in, all the facts relating to fees are apparent. This is yet another way of upholding transparency and accountability. Ways in Which Transparency Will Be Improved Apparently, transparency and accountability are core values in any arrangement, institution or scheme involving more than one person (Australia & CCH Australia Limited, 2011). Transparency will at all times remain the most powerful tool against corruption and fraudulent acts. The Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill 2012 will significantly boost the transparency of superannuation in Australia. Fundamentally, the bill comes up with a number of proposals that will come with quite a number of positive implications on financial decisions such as taxation. The first way in which the bill enhances transparency and accountability is through laying total bans on entry fees in superannuation. Along with the ban comes a comprehensive framework of rules and regulations guiding all parties on decisions relating to how financial and professional advice is accessed (Newnham, 2012). Worth mentioning is that in offering professional advice, there may be some inconsistencies and fraudulent conduct. It is for this reason that the bill clearly provides guidance for the manner in which such advice shall be sought and remunerated. Financial advice guidance is offered by financial analysts and managers regarding investment and the various risk profiles and the most rewarding of all available prospective high return ventures. Secondly, the bill requires all legally recognized superannuation funds to make a provision or life and TPD insurance coverage to all registered members, with an exclusion of the member beneficiaries that are described by the bill. Such provisions, by virtue that they are part of legislation, are transparent and eliminate any unseen inconsistencies that may provide room for fraud (Australia et al, 2012). Thirdly, the bill makes it possible for APRA to make a collection into a look through basis. By simple definition, a look trough basis is a prominent auditing idea that enables the APRA to establish any problems and inconsistent disturbances in the system. Such look through procedures eliminates any loopholes in the system. Worth mentioning at this point is the actuality that the look through procedures endeavor to give a true and fair view of the status quo. The most outstanding feature of the bill is the requirement of full disclosure and due publication of primary information and facts in relation to superannuation funds. Critics have argued that this is the strongest point of the bill as far as transparency, disclosure and accountability are concerned (Australia et al, 2012). Primarily, this is because disclosure and publication brings out everything to the public in such a way that the public can question any loopholes in the system that, in essence, services a good percentage of the citizenry. Of particular concern is the fact that such disclosure is mandatory as failure to disclose any information relating to superannuation is a contravention with the constitution. This amounts to criminality and can be prosecuted in a court of law. The bill permits only those funds which offer a MySuper product and creates an exemption for public schemes to be eligible and recognized as default funds in current awards and enterprise covenants. By permitting the public schemes to be eligible and to be recognized as default funds, transparency becomes a key factor embraced by the bill. The public is given priority and what can be termed as preferential treatment in accessing the information relating to superannuation (Newnham, 2012). The legislation allows exemptions from MySuper for members described statuses. Essentially this opens up the system for all to understand how MySuper, as an integral element of superannuation operates and the rights and obligations in relation to members of the various categories. The Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill 2012requires trustees to transfer certain existing balances of members to MySuper. There have been cases in the past relating to mysterious disappearance of funds that remain as balances of the superannuation funds. The mystery of the lost funds is a thing of the past as the legislation solves this. Through the provision for the transfer of funds, fraudulent acquisition of such monies is mitigated. This ensures all funds are channeled to the right individuals. Conclusion In conclusion, it is noteworthy that superannuation is critically important and should be treated as such. The fact that retirement is a burden to the economy is worth noting. It may not be realized but when people retire, their flow of income ceases. As such, they become dependants on the working class. Dependency can paralyze the economy as it limits the ability of the working class to save and invest (Pearson, 2009). The introduction of MySuper along with The Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill 2012 is a great step towards enhancing transparency and accountability in the handling of funds relating to retirement. Apparently, people are now aware of their rights and obligations with regard to information relating to Superannuation. Notably, the bill treats superannuation and MySuper with the urgency and regard they deserve. Summarily, The Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill 2012 is bound to boost transparency. References Australia. (2010). Mysuper: Optimising Australian superannuation. Canberra: Attorney-General's Dept. Australia., & CCH Australia Limited. (2011). Australian superannuation legislation 2011. Sydney, NSW: CCH Australia. Australia., O'Neill, D., & Australian Securities and Investments Commission. (2012). Inquiry into the Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill 2012. Canberra: Parliamentary Joint Committee on Corporations and Financial Services. Australian income tax legislation 2011. (2011). North Ryde, N.S.W: CCH Australia. Colquhoun, L. (2012). MySuper: Insurers prepared, but need more from government. Investment Magazine, (88), 38 Gruen, D., & Wong, T. (2010). MySuper—thinking seriously about the default option. Economic, 33. Newnham, M. (2012). Self Managed Superannuation Funds: A Survival Guide. Hoboken: John Wiley & Sons. Pearson, G. (2009). Financial services law and compliance in Australia. Cambridge: Cambridge University Press Read More