The requirement under Stronger Super to roll over a member's account into a MySuper product when no choice has been made could pose liability problems for trustees, according to research firm Chant West.
Chant West director Warren Chant said if MySuper products ended up including a large portion of index strategies, members could be worse off.
"The retail funds, their response to MySuper is they are going to produce relatively low-cost index products," Chant said at the ASIC Summer School in Sydney earlier this week.
"Not that there is anything wrong with indexing per se, but if we look at the history of performance of super funds in Australia over the last 20 years, it is basically undisputed that industry funds have outperformed retail funds by about 1.25 per cent per annum."
Chant said those products were not simple, low-cost products.
"They are probably the most sophisticated products in the world. Those products are very well diversified and they invest in areas that are expensive, but they invest in those areas because they offer the best returns for members," he said.
"If the retail sector is going to respond with index products, we don't think that those products are going to perform, net of fees and tax, as strongly as what we have seen from industry funds.
"And yet we will see that these products have an appeal, because they have been marketed as simple, low cost.
"We have been critical of MySuper because we think there is going to be a very serious unintended consequence and that is the slogan that attaches to MySuper of simple, low-cost super is very, very misleading."
Chant argued that in this situation members could be switched from sophisticated, well-performing products to an average product, creating a potential pitfall for super trustees.
"If the retail funds come out with that index product as their MySuper option, then those people who are currently with what is quite a good product will be compulsorily transferred into a product which might not be as good," he said.
"What is the position of trustees if one of those members subsequently turns around some years down the track and said 'you didn't act in my best interest'?"
Currently, there is nothing in the MySuper draft legislation that safeguards trustees from legal action against such transfers.
"The law is simply saying you have to transfer your money into a MySuper product and that MySuper product might be a worse product," Chant said.
