New super laws need sensible changes to rid the system of underperformers and ensure the disgraceful conduct unearthed by the Royal Commission does not happen again.
Unamended the Your Future, Your Super Bill lodged in Parliament today, will allow dud for-profit funds to keep underperforming without consequence and ripping more than $10 billion in profit without ever having to justify how its inflated fees are in their best financial interest of members.
Subject to changes being made to the Bill that will ensure members are better off, Industry Super Australia supports the package of reforms.
The government’s proposed performance benchmark tests need strengthening and expanding. They must include all fees charged – the government has excluded administration fees from the test, which are far higher in the retail sector and how those funds generate profits for shareholders.
About 80% of the choice sector will likely be shielded from the performance benchmark tests, despite the Productivity Commission finding this is where most of the dud funds are found. There is also no timeframe to test almost 70% of for-profit funds – that is 6.7 million-member accounts holding $427 billion in assets.
The regulatory kill switch is unnecessary and an ideological overreach. Reports today suggest extreme elements of the Coalition party room will try and use this power to ban fund ESG investment or vital investments in affordable housing. An added regulation making power is equally concerning, it appears it would allow the Minister to dictate what is in members’ best financial interest giving politicians unfettered control over workers’ super.
ISA supports sensible changes that are in members’ best financial interest including:
Ø Net return as a performance benchmark rather than net investment return
Ø Forced closures of chronically underperforming funds
Ø Making sure trustees justify all fees being in members best financial interests, especially those charged by related parties above a cost recovery basis and used to generate profits paid to shareholders
Ø Expanded coverage to mandate that all funds and products – including the Choice sector – must also pass the benchmark tests, with no carve outs
Ø Sequencing of reforms to ensure performance measures are implemented before stapling Australians to one fund for life.