The Your Future, Your Super package needs to ensure stapling of superannuation funds should commence later than what is proposed, that members are not stapled to underperforming funds, and the best financial interests duty needs amendment, according to Aware Super.
In its submission to the Government’s proposed super reforms, the superannuation fund said the stapling process, which was not due to begin until the Australian Taxation Office had built the service, after 1 July, 2022, would not be enough time to allow for other stakeholders in the payroll chain to be brought into the process.
“We believe the effort and potential risk of creating what will initially be a manual system for employers is not outweighed by the benefits of stapling during this time, especially while underperformance is largely unaddressed,” it said.
Aware suggested that stapling should not commence until 1 July, 2023, at the earliest, to ensure full implementation of end-to-end electronic look up and deliver services, allow sufficient time for payroll software to be updated and for the service providers to be onboarded to the ATO system, to enable a fully-automated process for large employers, and to lower the costs for both employers and trustees, and ultimately member through a technology-driven approach.
The submission also said measures to remove underperforming products was not sufficient to protect disengaged members remaining in underperforming funds.
“Taken together with the stapling measure as proposed, relying solely on disclosure will result in the most disengaged and vulnerable members being left in underperforming funds, while the fund’s position and viability deteriorates,” the submission said.
“There need to be stricter measures around underperformance to merge or move members to avoid problems of the ‘last person standing’ as laggard switchers are left in the failing fund.”
The submission also noted that the Government adding the word “financial” in best financial interest duty did not add clarity, was unnecessary, and lacked sufficient justification.
“There is potential for increased confusion with the increasing number of tests that trustees are required to complete to demonstrate appropriate financial control,” it said.
Aware said the best financial interests duty needed amending to:
Remove the evidentiary onus of proof on trustees, directors of responsible superannuation entities and self-managed super funds and change to a best endeavours approach, in line with standards that apply to most corporations and institutions;
- Remove the logically inconsistent, very broad requirement for regulations to be able ‘to specify that certain payments, are prohibited, or prohibited unless certain conditions are met. These payments are prohibited regardless of whether the payment is considered to be in the best financial interests of beneficiaries’; and
- Consider a concept of materiality to avoid costly bureaucratic overload.