The Government’s proposed superannuation laws fail to adequately address underperformance and this needs to be addressed before stapling begins, the Australian Institute of Superannuation Trustees (AIST) believes.
In a submission to the Government’s Your Future, Your Super legislation, AIST said while it supported the intent of the legislation to empower members and hold funds accountable for performance, it would not be achieved without substantive changes to the legislation and additional measures.
It said the proposed legislation only required some products to undergo performance testing and ignored Productivity Commission recommendations to allow the regulator to wind up underperforming funds.
AIST chief executive, Eva Scheerlinck, said: “The new laws will see many disengaged members stapled to dud super products where they could languish for years.
“The priorities of this legislation are the wrong way around. Underperformance in our super system must be substantially addressed before any stapling occurs.”
She said another concern was the Government’s reliance on consumer disclosure as the primary means to get members to switch out of underperforming super products.
“When it comes to complex financial products such as superannuation, the Productivity Commission, ASIC [the Australian Securities and Investments Commission] and the Hayne Royal Commission have all previously warned about the dangers of relying heavily on disclosure to improve consumer outcomes,” Scheerlinck said.
“Rather than putting the onus on individuals to take action on their fund’s underperformance, as per the Productivity Commission’s recommendation the Government needs to give the regulator the power to transfer existing members of all underperforming products to better products.”