Regulator challenged on ethical considerations in performance test

Questions have been raised during Senate estimates as to whether a superannuation’s fund ethical framework should be taken into account during the annual performance test.

Appearing at Senate estimates, the Australian Prudential Regulation Authority (APRA) was asked about the underperformance of the Christian Super fund which had a faith-based mandate excluding a range of industries.

This was likely to be significantly different to the benchmark used to measure funds during the annual performance test.

Labor Senator Anthony Chisholm asked APRA whether the regulator took this mandate into account when comparing it to the benchmark.

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APRA executive member, Margaret Cole, said: “The performance test regulations emanated from Treasury, from the government. That wasn't APRA's consideration. We were the ones that implemented the test in accordance with those regulations. I'm not aware that there was anything specific in there in relation to faith-based investment”.

Senator and minister for superannuation, financial services and the digital economy, Jane Hume, added there were other ethical funds such as Australian Ethical which had passed the test and was a top-performing fund, indicating ethical framework was not automatically a hindrance to returns.

She said: “They're based on an investment benchmark, not an ethical benchmark. We don't do a faith overlay, if that's what you're asking. In all honesty, neither should we.

“Let's face it, why should we discriminate against people of faith, and say, 'It's okay for you to have an underperforming fund, but people that invest in other parts of the superannuation system get a bonus; we're going to punish you because you're of faith.' I think that's entirely unfair. Let's face it, Christian Super could quite easily have a product that isn't a MySuper product, that people could choose to go in. But MySuper products are there for default.”