12-month deferral urged to super performance tests

The Federal Government should defer the implementation of performance testing of superannuation funds for at least a year to give the industry and the regulator time to get the details right.

Leading superannuation asset consultant, JANA Consulting has called for the implementation deferral in a submission to the Senate Economics Legislation Committee arguing that there is simply not enough detail available to move any sooner.

The effective 12-month deferral being recommended by JANA would push implementation of a key element of the Government’s Your Future, Your Super package out to beyond the next Federal Election.

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“The implementation of the ‘Addressing Underperformance in Superannuation’ package should be deferred until 1 July, 2022, to provide the industry adequate time to consider and consult on the significant detail to follow in yet to be drafted regulations,” the JANA submission said.

“This would also allow time for policymakers to consider and consult on an appropriate performance test for lifecycle products, which make up a growing and large part of the MySuper universe. The October Budget announced performance test is most easily applied to single strategy products and consideration needs to be given to how the performance test might apply to lifecycle products,” it said.

“The implementation of the ‘Addressing Underperformance in Superannuation’ package for Choice multi-asset products (trustee-directed products) is inherently more complex given the range of products and design specifications including SRI/ESG [socially responsible investments/ environmental, social and governance] products and risk-managed products such as post-retirement, absolute return and lifecycle products.

“For reasons set out further in this Note, JANA does not believe it is necessary for a performance test to apply to Trustee-directed products where members have made an active choice to select a product,” it said.

“JANA is also cautious about the application of a single performance test for Trustee-directed products where there is no detail provided as to how performance tests would apply to this category of products (if at all).

“If there is the desire to apply a performance test to Trustee-directed products, we believe that implementation of any (as yet to be determined) performance test for Choice Trustee-directed products should be deferred to post 1 July, 2023. This should include a reasonable lead time for consultation with the industry for both applicability of a performance test to Trustee-directed products and the specific details of how such a test would be applied.”

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