Super projections meaningless unless tailored: AIST

The Australian Institute of Superannuation Trustees (AIST) has warned that end-benefit projections risk being irrelevant to members unless they are net of all fees and charges and linked to members’ investment choices.

AIST said it supports the concept of mandated end-benefit projections (under strict regulatory control), as well as the standardisation of calculation methods.

Projections should, however, “be personalised to reflect the investment options and fee structure of the fund to which each member belongs”.

“There is no point introducing end-benefit projections that are so general they become meaningless,” AIST chief executive Fiona Reynolds said.

“Consumers need to be able to see the details of their fund, not some mythical fund, and have a clear understanding of the impact of fees, their investment choice and the effect of their pension entitlements,” Reynolds said.

AIST said end-benefit projections would be even more useful if they were linked to members’ pension entitlements.

In its submission to the Australian Securities and Investments Commission’s (ASIC’s) consultation paper on superannuation forecasts, the AIST recommended that rather than the Government mandating the rates of returns used in end-benefit projections, assumptions should be based on information in the fund’s Product Disclosure Statement (PDS).

The AIST said the projected earnings figures in a fund’s PDS could be used for this purpose, as the PDS is subject to regulatory approval.

And while the AIST sees calculators and end benefit projections as “complementary services”, it believes calculators should be optional rather than mandatory, but both should be regulated.

The industry body said this was “important to avoid the sorts of problems experienced in the UK in the 1990s, when consumer forecasting tools were widely abused by commissioned agents”.

“It’s vital that we have the right regulatory framework — particularly when it comes to the setting of assumptions — to protect consumers from being misinformed by overly-optimistic forecasts,” Reynolds said.