The draft Your Future, Your Super legislation will subject superannuation funds to an annual performance test, excluding administration fees and other non-investment charges, which Industry Super Australia (ISA) believes will give poor-performing retail products a leg up.
The ISA pointed to several different research papers, all of which showed that net returns after fees and taxes are the most relevant fund performance measurement for members.
However, under current measures, APRA will be tasked with assessing the performance of super funds annually, with those that are found to be underperforming two years in a row set to be barred from receiving new members. Members will only be notified if they are in an underperforming product if returns drop below 50 basis points off the benchmark.
According to the industry funds body, without stronger performance tests, “dud for-profit super funds” can go on charging up to four times the median fees, costing Australians up to $160,000.
“When it comes to workers’ retirement savings, measuring the performance of super funds should be a matter of one in all in – every super fund and every fee,” said ISA’s deputy chair Matthew Linden.
“The government’s plan to shield the worst-performing retail funds from proper scrutiny could mean millions of workers get stuck in a dud fund for life.”
As such, the ISA has accused the government of favouring the retail funds, claiming retail products have administration fees that are 75 per cent higher than the median MySuper member.
Administration fees that cost member balances as much as 1.02 per cent could fly under the radar, the industry body has said.
“Workers can only be protected if every fund and every fee is included in the tests. Anything less than that reeks of vested interests inappropriately influencing the benchmarks and the government running a protection racket for dud-profit-generating funds – and that could leave workers worse off,” he concluded.
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