NEW MILITARY SUPERANNUATION SCHEME – Assessing Your Options
In just over six months, a new era of consumer choice starts in military superannuation. On 1st July 2016, the days of ADF members joining one compulsory superannuation fund (MSBS) will be over. MSBS will continue unchanged for existing members who choose to continue in it, but will be closed to new entrants from that date.
The current compulsory fund will be replaced by a new military superannuation scheme in which all MSBS members (not DFRDB members) will be offered the opportunity to direct all new employer contributions, at the generous rate of 16.4%p.a., to any legally approved superannuation fund of their choice. Choices will include industry, retail, self-managed superannuation funds and a new default fund called ‘ADF Super Fund’, the trustee of which will be the Commonwealth Superannuation Corporation (the current trustee of MSBS and DFRDB). In addition, there will be a new death and invalidity scheme called ‘ADF Cover’ for eligible members who choose to transfer to the new superannuation scheme. The level of death and invalidity cover in ‘ADF Cover’ will be consistent with that provided by MSBS.
Of course, there’s more to it than this brief summary of key facts. Therefore, whatever you decide, you should do so in an informed manner, not by guess work or based on what well-intentioned, but ill-informed colleagues might tell you. To assist you in making an informed decision which is in your best interests, some excellent educational material is available in the ‘Guides’ section of the Centre’s website, including Frequently Asked Questions (www.adfconsumer.gov.au).
Our website also contains an educational film about choosing a financial adviser. We recommend this film to all ADF members who are thinking about seeking financial advice before deciding on a preferred superannuation option. The film is called “Financial Advisers – The Facts and the Fiction”. It outlines the key issues to consider and questions to ask before appointing an adviser. The Centre has also established a list of licensed financial advisers who have undertaken to provide professional advice, including superannuation advice, on a genuine fee-for-service basis. These advisers are members of the ADF Financial Advice Referral Program. The Program was developed as a direct result of our members wanting access to trusted financial advice, but not knowing how to source it (which is hardly surprising given the industry’s reputation).
All the advisers listed in the Program have given a written undertaking to Defence that they do not receive any form of conflicted remuneration (such as commissions, product bonuses and asset fees) that may cause their advice to be biased against your best interests and in favour of selling you a product that you don’t need or want. You can see the undertaking and view the list of advisers at the Centre’s website (www.adfconsumer.gov.au).
At the time of writing this article, some forty five individual advisers, based throughout Australia, have signed up to the ADF Financial Advice Referral Program. Make sure before you settle on an adviser that you understand the scope of the services on offer (limited or comprehensive) and the fees that you are likely to be paying for that advice. Consider talking with a number of advisers before appointing one.
Of course, it’s completely up to you as to whether you research your options and seek professional advice. However, the important point is that excellent resources, both educational and professional, are available to assist you in your superannuation choices. These resources will be expanded as we approach 1st July 2016.
Therefore, ADF members are strongly encouraged, before making a decision, to read about and understand the new superannuation arrangements and to consider seeking professional advice. Having gone through that process, you should feel satisfied that you’ve performed a comprehensive “due diligence” and have made a choice that is in your and your family’s best interests.
Air Commodore Robert M C Brown AM is a chartered accountant and is Chairman of the ADF Financial Services Consumer Centre, a member of the Australian government’s Financial Literacy Board and the Australian Securities and Investments Commission’s Consumer Advisory Panel.