While surveys may be skewed to an extent, they almost effectively summarise consumer sentiment. It then comes as disturbing news that fund executives and superannuation trustees (acting as survey respondents) believe that less than 30% of the SMSF members actually understand the life insurance cover they are being sold with their super fund.
SMSF Members have little understanding of insurance, say trustees
What becomes even more indigestible is the fact that 30% of the respondents believe that the percentage of “I understand life insurance via SMSF” members is only about 10%. Can the rating get any more abysmal? Is it not akin to sellers carving out their fortunes out of the buyers’ ignorance? What’s more surprising is that they are accepting the fact in a survey conducted by a reputed team (Metlife).
Already, the SMSF trustees have bitten the Australian Prudential Regulation Authority’s (APRA) bullet. APRA believes that the super trustees have quite different interests from the SMSF members they are serving and on occasions of conflict of interest they first look to cover themselves.
Slattery hits back at APRA’s proclamation
This observation, however, has been completely denounced by SMSF Professionals’ Association of Australia’s (SPAA) chief executive Andrea Slattery. She is convinced that the APRA’s aim to use prudential principles for the SMSF sector can spell doom. SMSF is too small a market for prudential regulation and that such overseeing should be restricted to the environment of high level processing.
SMSF, observes Slattery, already has guidelines in place to ensure that the money is solely employed for putting up a decent post-retirement fund for its members.
Surely, there is a lot of ambiguity in the picture and it is difficult to say if the fund members can really put their trust in the intention of its keepers. This said, overregulation of SMSF by the tax authorities might bring up unsolicited compliance costs, increasing the red tape burden on the economy even further.
Should prudential guidelines be applied to the super fund sector?