Fears half of super system may be exempt from performance test

December 14 2020
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While the Your Future, Your Super measure has been a topic of debate for weeks over its ability to create possibly unintended consequences, new questions have emerged about the measure’s ability to police some 8.4 million member accounts.

Last month, claims surfaced that Your Future, Your Super could risk leaving members worse off, with fears emerging that members currently in underperforming funds could be stapled to those funds.

These claims have now gained more weight, with new research questioning the measure’s ability to police almost $900 billion in super assets.

According to Industry Super Australia (ISA), an eye-watering estimated $881 billion in retirement savings belonging to 8.4 million member accounts, or about 47 per cent of the APRA-regulated system, could be exempt from the government’s new Your Future, Your Super performance benchmarks.

ISA warned that among those currently out of the test are “notorious dud investment products” whose poor performance and fee gouging were savaged by banking royal commissioner Kenneth Hayne in his final report.

“If the government doesn’t apply new performance tests to all super funds and products, millions of Australian workers may never find out that their savings are being eaten away by a dud investment,” said ISA chief executive Bernie Dean.

“Every worker, no matter if they choose a retail or industry fund product, deserves to know how their super fund stacks up so that they can make an informed decision about switching to a better fund.”

But ISA said that it has identified further issues. It warned that under the current legislation, the government will only initially test the performance of MySuper and “trustee-directed products” in the Choice sector, potentially excluding hundreds of products and investment offerings.

“We applaud government moves to tackle underperformance – which can be a huge drain on worker savings – but to be meaningful, the new tests should apply to whole system, and certainly to the for-profit products in the Choice sector, which a number of government reviews have found are rife with poor-performing products,” opined Mr Dean.

“Leaving much of the Choice sector and administration fees out of the performance benchmarks means the government is giving many for-profit funds a licence to continue to fee gouge on their members’ savings.”

At a Senate inquiry, Superannuation Assistant Minister Jane Hume confirmed that the government had no time frame to extend the performance benchmark beyond trustee-directed products.

And, according to ISA, the government’s proposal leaves almost 70 per cent – 6.5 million accounts holding $425 billion in assets – of the big bank-dominated retail super fund sector out of scope.

“It is vital this benchmark is extended to the entire system before the government proceeds with its plan to staple members to their first super fund, or members could be condemned to a dud fund for life.”

About the author

Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of nestegg and Smart Property Investment. Email Maja at [email protected]

About the author

Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of nestegg and Smart Property Investment. Email Maja at [email protected]

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