Retirement
Big super seeks to ‘raise the bar’ on industry changes
Australia’s largest superannuation fund wants the federal government to go a step further on the planned “Your Future, Your Super” reforms and take a stronger approach to underperforming funds.
Big super seeks to ‘raise the bar’ on industry changes
Australia’s largest superannuation fund wants the federal government to go a step further on the planned “Your Future, Your Super” reforms and take a stronger approach to underperforming funds.
On Tuesday, 6 October, Treasurer Josh Frydenberg said the Your Future, Your Super package would allow employees to take their super fund with them when changing jobs, “name and shame” underperforming funds, and demand funds to give more information to the public about their investment decisions.
Industry Super Australia chief executive Bernie Dean has welcomed the changes to superannuation, with members assuming funds will “do the right thing”.
“It can cost young workers more than $500,000 – that’s the difference between being in a top-performing fund and a dud at retirement,” Mr Dean said.
“So, we welcome the news that the federal government is at last planning to act on fund underperformance. Any changes should deliver more money to members, not less.”
During a hearing of the standing committee on economics on Friday, 6 November, a member of Industry Super Australia, Australian Super, told the government that superannuation funds should act in members best interests.
“The objectives of the [Your Future, Your Super] are wholly supported by Australian Super,” chief executive Ian Silk said.
“There are a number of areas we would propose to the government to improve the likelihood of those objectives being met.”
“This is not a mealy-mouthed ‘agree in principle’. We’re looking to raise the bar, not weaken it,” he said.
While highlighting the fund “wholly supports the objectives”, Mr Silk believes more of the detail is needed.
“Much of the detail remains to be revealed in the legislation and in regulations, but from what we have observed through the budget night announcements, there are a number of areas that we would propose to the government – and we’ll seek to do that when the bills are available – to improve the likelihood of those objectives being met,” Mr Silk said.
Mr Silk believes the reforms should apply to all superannuation funds and options, and questioned why they only measured investment fees, calling the decision to exclude administration fees “an oversight”.
“The government has quite rightly said, ‘people are interested in what lands in their account’, and what lands in their account is a function of contributions and investment returns, less investment fees and less admin fees,” Mr Silk said.
“The government’s proposal seems to take out admin fees from the calculation. We say that, self-evidently, it should include all fees, so that’s a really critical change we think should apply.”
Weight on individuals
According to the CEO, the new laws need to go a step further, with the current proposed changes putting the weights on individuals instead of penalising the fund.
“The first penalty is funds will be required to write to their members if they are an underperforming fund.”
“That requires the members to receive it, open it, understand it and importantly to act on it with the implication of receiving it to change funds,” Mr Silk said.
After three years of underperformance, the fund is penalised to the extent it can’t receive new default members.
“The problem with both of those is that the action is on the individual. In the second case, individuals remaining in the fund could be stuck in a zombie fund.
“So, we say the onus should be on regulators to get rid of poor-performing funds instead of relying on individuals to respond,” Mr Silk concluded.
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