Performance probability needed on product dashboard, says AIST

Return targets could be manipulated by using different probabilities under Product Dashboard requirements, the Australian Institute of Superannuation Trustees (AIST) has said in a submission to the Australian Prudential Regulation Authority (APRA).

AIST said that the probability of achieving a targeted return should be included in target return requirements but that this probability should be high — 75 per cent — based on the potential for large margins of error.

Cbus estimated the difference between a 50 per cent probability target and 75 per cent target to be 2 per cent per annum. This means an investment objective of CPI+3.35 per cent per annum on a rolling 10-year basis would change to CPI-5.5 per cent with a 50 per cent probability, according to AIST.

"The basis for a return target is much less credible if it can be manipulated by changing the assumed probability of achieving the target," it said.

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Consumers would reasonably think that their super fund had a high probability of achieving the targeted return — and they needed a high figure to be mandated to imbue confidence in the system.