The SMSF Association believes preventing elder financial abuse requires increased education for trustees and advisers, not stricter legislation.
The dangers emerging from an ageing population and cognitive decline makes elderly superannuation fund members more vulnerable to financial risk, but the SMSFA's head of policy Jordan George said it stands by its belief in not prescribing arrangements for loss of capacity.
In response to the elder abuse discussion paper released by the Australian Law Reform Commission, George said the issue should be "more carefully considered and planned for by trustees and their advisers."
"The Association is wary that prescribing them step-by-step in the legislation would be an unnecessary and exhaustive process that would not solve the issues the paper discusses. Therefore, we believe education of trustees and advisers is a more effective approach," he said.
One proposed amendment is for the "trustees of the fund [to] formulate and review regularly the consideration and planning of the loss of capacity and SMSF exit strategy as part of their investment strategy."
George added trustees should also put insurance on the front of their minds, which "will have the same effect with estate and succession planning."
He also said there needs to be "greater awareness and education" on the legal risks surrounding poorly constructed and executed binding death benefit nominations (BDBNs) to encourage trustees and their advisers to get legal advice on these matters.
People should only be able to make or renew a BDBN for a member if expressly authorised to do so under an enduring power of attorney and the same rule should apply for reversionary pensions.
"The Association believes that the ongoing uncertainty around the application of the BDBN provisions is an emerging risk for the SMSF and broader superannuation sector as the system matures and Australia's population ages," George said.