Retirement
Super reforms to save members thousands but should go further
The “Your Future, Your Super” reforms announced during the federal budget are heading in the right direction, with members potentially benefiting, an industry expert has said.
Super reforms to save members thousands but should go further
The “Your Future, Your Super” reforms announced during the federal budget are heading in the right direction, with members potentially benefiting, an industry expert has said.
On Tuesday, 6 October, Australian 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.”
The reforms at present will allow the duds to keep fee gouging as their administration fees and other hidden charges are exempt from the tests, Mr Dean said.
However, Mr Dean believes reforms need to go further and take into account more than just investment fees.
“Excluding any type of fees from such an important test would be a big mistake. The only measure that matters to what Australians have at retirement is what members get into their account – that is investment returns minus fees, costs and charges. Anything else is illogical.”
Mr Dean also voiced concern that a loophole would allow underperforming funds that should be removed from the system to survive.
“The government’s proposal is to ban funds that repeatedly fail the tests from taking in new members, but it does little to get members out of those funds,” Mr Dean said.
“We need to do better than that. The government is headed in the right direction, and with some refinements to their proposals, Australians’ savings will have stronger protections.”
The case of administration fees has been a sticking point for opponents of the reforms, with shadow finance minister Stephen Jones seizing on statements made by backbencher Andrew Bragg.
Senator Bragg told Sky News on Thursday, 22 October, that “all fees should be taken into account in the performance tables the government has proposed,” Mr Jones said.
“Labor agrees. As the Productivity Commission has made clear, Australians pay the second-highest administration fees in the world for their super funds.”
“It is vital administration fees are made transparent to super fund members in any measurement of their funds’ performance,” Mr Jones said.
“Labor warned the government its failure to do so was a major design flaw in its plans. Senator Bragg knows this is true. If Assistant Minister Hume won’t consult with Labor or the industry to fix her botched budget announcement, she should at least take advice from her backbench colleague.”
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