The Financial Services Council (FSC) has urged the Federal Government to use next month’s budget to cut red tape preventing the retirement of substandard legacy financial products.

At least 600 legacy structures across life insurance, superannuation and managed investments disadvantage about 2.44 million people, the FSC says.

Considerations include the complexities of transferring customers to new products, with capital gains tax and stamp duty implications. Superannuation trustees must also ensure that transferring members from one fund to another without their consent is in their best interest.

The FSC gives the example of a life insurer that needed a computer programmer fluent in 1950s code to implement a regulatory system change. Another has customer records on microfilm.

It warns system failures are more likely with legacy products because support systems are less resilient and they are harder to restore.

They are less economic to run, and it is harder to find support staff.

The FSC wants taxes removed from transfers to other life insurance schemes. A test should ensure the transfer is in the interests of consumers, it says.

A Productivity Commission inquiry into superannuation estimates $160 billion of assets were held in legacy products in 2017.