AUSTRALIAN BANKERS’ ASSOCIATION SAYS CONSUMERS MUST HAVE CONFIDENCE IN FEE DISCLOSURE MODEL

Sydney, 5 April, 2004: The Australian Bankers’ Association (ABA) said today that the Investment and Financial Services Association’s (IFSA) fee disclosure model provides meaningful disclosure in such a way that consumers can compare superannuation providers.

With negotiations now stalled between IFSA and the Association of Superannuation Funds of Australia (ASFA) regulators must move quickly to support a fee disclosure regime in which consumers can have confidence.

David Bell, Chief Executive of the ABA, said: “Superannuation is far too important to Australians and their retirement plans for them to be left in the dark.”

The ABA supports the IFSA package of proposals as being the most transparent, readily understood and therefore in consumers’ best interests.

Mr Bell said: “Given the introduction of the Australian Securities and Investments Commission’s (ASIC) fee table, there can be no doubt that IFSA’s ‘single fee measure’ is the best model for disclosing the information that consumers need to make informed decisions about which superannuation fund to join.”

“The IFSA package means that consumers will be told about the cost structure of their superannuation fund, and whether fees and expenses are paid on a one-off basis or are ongoing. This meets with international best practice as promoted by securities regulators around the world.”

Globally regulators have retreated from the use of projections, for example, as the Chief Executive of the UK’s Financial Services Authority, John Tiner, noted in a recent speech:

“We cannot discount the extreme option of prohibiting projections all together.” [1]

The ABA says there are better methods to demonstrate the benefits of saving early for retirement such as the gains provided by compound interest, which would no doubt be supported by consumers.

“Fanciful projections of fees spanning up to thirty years, based on guesses about future economic variables, are bound to be misleading,” Mr Bell said.

“It is the ABA’s view that what consumers want to be told are actual fees at the time of purchase, so they can make an informed decision on what fees they will pay, for the services they want, from the fund of their choice.”

The ABA calls on the Federal Government, regulators and other participants in this debate to immediately support the IFSA model and base superannuation policy on sound regulatory principles, in particular, transparency.

For further information:

Heather Wellard

ABA Public Relations

Phone: 02 8298 0411

Mobile: 0409 830 439

ENDS