Your Super, Your Future legislation will be enacted within three months and leading players are weighing in on the impact it will have on Australia’s powerful superannuation industry.
Economist Peter Martin welcomes the proposed changes, saying: “Our funds are about to have to work for us first, and no-one else.
“The new laws . . . will require every cent of super fund spending . . . to be directed to the best financial interests of members,” he wrote for The Conversation.
“It’s our (mainly conscripted) money that they are spending. If they can’t make out a case for the way they are spending it, they might be acting as if it’s their own.”
Mr Martin says most of us don’t know we spend more on super investment and administration fees each year than we do on gas and electricity combined and often don’t find out how badly our fund is performing until it’s too late.
The bill has many flaws and should not be passed in its current form, AMP Australia CEO Scott Hartley told a parliamentary hearing last week, AAP reports.
“Despite the fact that there are no regulations, the government proposes the first annual performance test occurs in less than three months from now.”
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Martin Fahy, chief executive of the Association of Superannuation Funds of Australia (ASFA), wants the rollout of the laws delayed until July 2022.
He also wants the proposed performance test watered down to a two-year trial run.
Dr Fahy says the proposed 1 July start date will place an “enormous burden” on employers to manage the changes, especially arranging that employers have one default account for workers.
The Australian Industry Group (AIG) says businesses would not be ready in time.
But Super Consumers Australia director Xavier O’Halloran warns that any delay would hurt customers.
The existing system allows multiple accounts and workers can lose savings and be assigned to a default fund that performs poorly, he says.
“For too long, trustees have been left alone in the dark with our money.
“Australia’s superannuation system must move to a model that does more to ensure all people have a single, high-performing superannuation fund.”
Under the proposed laws, underperforming funds will not be allowed to sign up new members.
AAP reports there are 850,000 unintended multiple accounts created each year and holding multiple accounts can reduce a typical worker’s balance by $51,000 by the time they retire.”
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Nine reports that controversial elements of the bill include the performance test; “a ‘stapling’ measure that ties workers to one fund for life; and a ramped up ‘best-interest test,’ which aims to ensure funds are not unwisely spending your retirement savings”.
Assistant minister for superannuation Jane Hume told Nine the package was about “bringing down fees, boosting performance, eliminating duplicate accounts and stamping out sub-standard funds”.
Australia’s largest fund, AustralianSuper, says the performance test should rank funds on the overall return to members, by considering administrative fees as well as investment returns and warns that funds may anchor their investment strategies to the test’s benchmarks, which might harm long-term member returns.
It has also called for all fund trustees to be subject to the performance test, not just MySuper funds.
IOOF has labelled the best financial interest duty “unworkable”, because many expenses do not have “immediate, quantifiable” benefits.
Aware Super says the best-interest test would push up costs by increasing administration burdens.
Investor Daily reports that the construction industry fund has cried foul over the proposed reforms, warning retail funds could gain an unfair advantage.
Cbus chief executive Justin Arter is concerned the bill will not apply equally across super funds, making it anticompetitive.
“Why should a retail fund be free to advertise without limit, using its members’ funds that have been diverted to a parent company, while high performing industry funds are tied up in red tape justifying every dollar spent?
“Why should a fund that pays profits to a parent company not be required to demonstrate how this is in the best interests of members of the fund? All members, regardless of what fund they belong to, deserve the same level of protection.”
Do you support the superannuation system reforms? Do you know how much you pay in super fees each year?
Read more: Most people exhaust their super long before they die
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