We constantly talk about removing red tape, but it almost never gets done.
Another major frustration for your friendly FSC policy wonks is the Groundhog Day of legacy product reform.
Don’t switch off – this is important. This is the year that we just might crack it after 16 long years of trying – yes, we first put a product modernization scheme to Government way back in 2005.
It’s boring – but incredibly important. Millions of Australians and billions of dollars are trapped in legacy products across superannuation, life insurance and managed funds, many of which have high fees and lower returns, not to mention a reliance on old tech like microfiche and Fortran coding.
The road to product modernization is littered with good intentions and many reports: The Cooper Review, APRA, Productivity Commission. Even ASIC supports change.
So why can’t people simply move into modern products? Because almost everyone is prevented by crippling tax and social security penalties, which successive Governments have failed to fix.
We have devised a simple practical solution. To expedite the modernization of many legacy products, we’re urging the Government to set up a mechanism, like a special legal tribunal, where independent experts can make swift and binding decisions so consumers can transfer into modern products without financial penalty.
The Government has said for the past 6 years it wants to do this – so we commend our pre-Budget submission to the Treasurer.
This reform might not get them a big headline in the media, but it will make an enormous difference to every Australian stuck in a poorly performing, expensive products.
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