The Government’s Your Future Your Super legislation has done nothing to allay concerns that it will cause more consumer hard than good and not deliver on its objectives, the Australian Institute of Superannuation Trustees (AIST) believes.
The institute’s submission to Treasury said the legislation was overly reliant on regulations and that the drag regulations were silent on crucial issues impacting retirement outcomes.
AIST chief executive, Eva Scheerlinck, said: “In particular, there are no draft regulations at all to provide clarity and guidance around the entire of the Best Financial Interests Duty Schedule, which introduces an extreme Ministerial power to ban investments and extensive new duties and penalties for trustees”.
She noted that AIST support the legislation’s objectives but it suffered from “fatal flaws” that would result in significant unintended member detriment.
These flaws stem largely from the extent to which the package differs from the recommendations made by both the Productivity Commission and the Hayne Royal Commission,” Scheerlinck said.
AIST also said the legislation and draft regulations regarding the super product performance test carved out many Choice products which left members vulnerable to being stapled to poorly performing funds.
“On the one hand we have the industry regulator shining the spotlight on poorly performing Choice products, while on the other, we have legislation that not only allows many of these products to escape scrutiny, but will also staple members to them,” Scheerlinck said.
AIST’s submission also said other key concerns included:
- The definition of a stapled fund should include that members should not be stapled to underperforming funds;
- There is no detail on what investments will be prohibited through the regulation-making power; the record-keeping obligations and contravention of those obligations; and what is required for a trustee to meet the reverse burden of proof; and
- A number of measures in the draft regulations are not related to the Bill at all and so are untested, having not been subject to the Senate Inquiry or submission process. These new measures, which are material to member outcomes, are the annual member meeting requirements, changes to section 68A and portfolio holdings disclosure.
The institute also said the draft regulations were not released in time to be considered by the Senate Inquiry into the Bill which reduced the efficacy of its inquiry.