Super funds to simplify comparison labels

Only 37% of Rest superannuation members say they find superannuation and retirement products easy to understand, according to research commissioned by the fund. The findings have prompted calls for standardised investment labels to help Australians make more informed decisions. The research, conducted by Redbridge Group, found 84% of members believe clearer, plain-language descriptions would make it easier to compare their options.

The results come as the Treasury consults on stronger consumer protections and reforms to the superannuation performance test. Rest chief investment officer Michael Clancy said inconsistent naming conventions across investment options were contributing to member confusion.

Labels hide real differences in risk

Clancy said while many super funds offer investment options carrying the same names, such as “Balanced,” the underlying risk and return characteristics can differ significantly between providers. “An unacceptably high number of our members say they find super and retirement products too complex. We want to help them be confident in their financial future so they can enjoy their best retirement,” he said.

“We believe the inconsistent labels applied to investment options is a significant contributor to this confusion. It can be very difficult for members to make like-for-like comparisons of product features and risk levels.

“Many funds offer an investment option named ‘Balanced’, for example, but there can be a wide disparity in these options’ individual risk and return profiles. One fund’s ‘Balanced’ option can be very different to another fund’s option with the exact same name.

“This makes it hard for members to make meaningful comparisons and, worse, can inadvertently expose them to a level of risk they may not be comfortable with were they better informed.”

Clancy said recent high-profile fund collapses had highlighted the importance of ensuring consumer protection frameworks remained fit for purpose. Standardised labels could reduce the risk of consumers selecting products they do not fully understand or that are unsuitable for their risk profile.

Fund pushes for government-backed framework

Rest is calling on the Australian Government to work with industry to develop a standardised labelling framework applying consistent risk categories and descriptors across comparable investment options. The fund said the proposal builds on the government’s work to develop a labelling regime for sustainable investment products, which it has previously supported through submissions to the Treasury.

“Members could benefit greatly from standardised investment labels that apply consistent definitions for different risk categories like ‘Conservative’, ‘Balanced’ and ‘Growth’,” Clancy added.

“A framework based on standardisation and consistency would improve transparency and allow members to make better-informed decisions.”