In a new statement issued by Industry Super Australia (ISA), the organisation has said that while the scheme had the potential to be “groundbreaking”, it will instead be the government’s “greatest gift to the big banks”.
According to ISA, while Your Future, Your Super certainly was a budding scheme that would have ensured the disgraceful misconduct by super trustees revealed at the banking royal commission could not happen again, it will now allow the big banks and the for-profit super sector to “skim up to $10 billion a year in profit no matter how bad the investment returns”.
“We thought the government had at last focused on reform that put members’ first, but instead they’re planning a feast for the banks and retail funds, and they’ll be dining out on workers’ savings,” said ISA chief executive Bernie Dean.
“The government is making countless dud retail super funds and investments immune from any meaningful performance tests, effectively giving some of the worst-performing financial outfits in Australia a licence to go on fee gouging.”
ISA clarified that under the proposed laws, fees and profits are excluded from the revamped members’ best financial interests test, which reverses the onus of proof if fund expenditure or investments are challenged by regulators.
As such, ISA said, billions in mark-ups that for-profit and bank-run funds pay to other parts of the businesses for services are excluded.
ISA referred to the practice as a “fee gouge” on members’ savings, which could generate up to $10 billion a year in profit.
Instead, the government, ISA argued, wants to install a “regulatory kill switch”, which would allow it to prohibit any super fund investment or expenditure they do not approve of, even if in the best financial interest of members.
“It’s as if the carnage we saw at the royal commission never happened, and instead we’ve got the government letting the foxes into the henhouse,” said Mr Dean.
“No matter how lousy they are, these dud funds will be able to go on creaming $10 billion in profit each year from members, without having to answer how it is in the members’ best financial interests.”
ISA further claimed that retail funds can also effectively bypass much of the requirements of the new laws test by filtering expenditure through the parent company or other arms of the business.
“The government has sided with the banks, and the retirement savings of millions will suffer unless it corrects course or the Parliament steps in,” Mr Dean concluded.
Last week, ISA said that 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.
“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,” Mr Dean said at the time.
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