The Australian Institute of Superannuation Trustees (AIST) has called for the Senate Committee examining the Government’s Your Future, Your Super legislation to reject the bill as it would leave millions of Australians at risk of poor retirement outcomes.
The financial services industry had largely welcomed the draft regulations as of 28 April it was announced the superannuation performance test would include administration fees and that unlisted infrastructure and unlisted property were being included as specific assets in the test.
AIST said its biggest concern was the stapling of Australians to potentially “dud funds”.
AIST chief executive, Eva Scheerlinck, said: “While we welcome the shift on more appropriate benchmarks and administration fees in the performance measures, the regulations unfortunately confirm widespread carve-outs to performance testing, including for the worst performing super products.
“Crucially, some of the worst-performing superannuation products have been carved out of performance testing, putting consumers at risk of being stapled to a dud fund for life which will actually reduce retirement outcomes.”
Scheerlinck said at least one-third of super funds, including those identified by the Productivity Commission as worst performers, would not be subject to the performance test, and any new MySuper products would not be subject to the test for the first five years.
She noted the regulation also failed to address the measure that allowed the government to ban super funds from investing in certain assets, even where the investment was in members’ best financial interests.
“The regulations are silent on one of the most controversial measures in the Bill – the standing power for any Government to ban any investment, even if it is in members’ best financial interests. This will create needless uncertainty that could constrain the ability of funds to invest for the long term and put members’ retirement outcomes at risk,” she said.
The institute said it was concerned the Senate Committee examining the legislation would not have time to consider the regulations closely as its report was due tomorrow and urged the committee to reject the Bill.
“The regulations released today have done nothing to change the fact that it is a poorly drafted piece of legislation that will deliver more consumer harm than good if passed in its current form,” Scheerlinck said.
However, the Financial Services Council (FSC) and the Association of Superannuation Funds of Australia (ASFA) both welcomed the draft legislation as they pointed to the inclusion of admin fees in the performance test.
FSC chief executive, Sally Loane, said: “The new regulations are complex, so we urge the government to carefully consider its approach to benchmarking administration fees, to ensure they accurately reflect the member experience.
“Until the much needed ‘stapling’ reforms are implemented the Government must take care to ensure superannuation funds cannot hide behind excessive administration fees on duplicate accounts that makes them appear cheaper than they are.
“With the July 1 commencement date imminent, and with the Bill still before Parliament, the FSC remains concerned that the tight timeframes will introduce significant risk into the implementation process.
ASFA chief executive, Dr Martin Fahy, said the inclusion of admin fees had the potential to mitigate investment distortions.
"Including all fees in the proposed benchmark will help align the benchmark to the reality of the returns members see in their superannuation, and help address any anomalies that different cost definitions might cause when comparing the performance of different products," Fahy said.
The association noted including Australian unlisted infrastructure and unlisted property would improve the accuracy of the performance test, strengthen the focus of the test on investment outcomes delivered to members, and ensure that Australian super funds could invest with confidence in these domestic assets.