The Budget measure that will block underperforming superannuation funds from taking new members is draconian, overly simplistic, and will promote index relative mediocrity, according to JANA.
JANA principal consultant, Matthew Griffith, said the move would reduce industry innovation and reduce the appetite for trustees to be different.
The approach, he said, was heavy-handed, interventionist, and ignored natural market forces and regulatory changes which had in the past resulted in heightened competition, consolidation, and pressure to maintain strong member outcomes.
“The ink is barely dry on recent regulatory innovations that are focused on member outcomes, creating heightened uncertainty with respect to retirement policy stability for members and the industry,” Griffith said.
“Further, this proposed change will potentially drive the market towards an oligopoly structure made up of ‘index huggers’ and mean more mediocre results for members.”
Griffith noted that the test only assessed funds on one criteria, the constant tinkering of super rules undermined confidence in the system and provided challenges for retirees attempting to plan for their retirement over long time horizons, and that this would prompt more extreme progression towards industry consolidation.
“We fear that the drive to be within 0.50% of an index benchmark will result in an ‘averageness’ mindset that might blunt enthusiasm for adopting points of difference which may be truly beneficial to members over the longer term,” he said.