The Minister for Superannuation and Corporate Law, Senator Nick Sherry, has urged the self-managed superannuation fund (SMSF) industry to focus on the issue of trustee education and competence as a key part of ensuring the long-term security and stability of the sector.
And the Minister has dismissed rumours, aired earlier in the convention by the Shadow Minister for Financial Services, Superannuation and Corporate Law, Chris Pearce, that some sort of minimum size requirement for SMSFs could be part of reforms introduced by the Government.
“The case for trustee education is a compelling one,” Sherry told the Self-Managed Superannuation Professionals’ Association of Australia (SPAA) national convention in Adelaide.
“While the majority of existing trustees are doing a reasonable job, a minority have very little idea of their legally set-down responsibilities. I know that this is of concern to you all.
“As you know, this has been demonstrated in the last ATO survey of new SMSF trustees, which found that more than 30 per cent of trustees could not provide an explanation of the sole purpose test and 15 per cent did not have an investment strategy.
With superannuation being compulsory, supported by significant tax concessions, and with the Government responsible (in the form of age pensions) for those for whom the SMSF experience may turn sour, I am sure you can see my interest.
“But here I would again acknowledge what SPAA has been doing. The focus on the role of education in the development of your policy positions is critical.
“I would today clearly lay down the challenge. The SMSF sector needs to move forward with its thinking on the role of education of trustees, and indeed it must be for all trustees.”
Sherry also voiced concerns over the use of debt instruments in SMSFs, particularly contracts for difference (CFDs), in an environment where trustee education and knowledge maybe lacking.
“I am genuinely concerned about the role of such products,” Sherry said.
“This issue is directly linked to the other key reform considerations [of] trustee education and knowledge. Do trustees understand the risks?
“It’s linked to a lack of prudential regulation. What risks are posed to the SMSF system as a whole?
“And [it’s linked back] to the retirement incomes system in full. What are the implications for other sectors and for the demand for pensions if things go wrong?).
“Earlier this week you saw the Shadow Minister attempt to inject some fear into this sector by telling you he had it on some kind of ‘good authority’ that minimum account balances were around the corner for SMSFs.
“While I am not proposing to get bogged down in a backwards and forwards debate on this issue, I can say that the Government has no such position.”
Sherry said the reputation of the SMSF sector relied on trustees being knowledgeable about their responsibilities, understand the risks associated with debt and gearing and complicated financial products, and on funds being run cost effectively.
“I would encourage SPAA and the sector more broadly to confront this matter going forward,” Sherry said.
“In the interests of your sector’s long-term future and reputation, I strongly encourage you to examine the issue closely.”
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