Commenting on the government’s Your Future, Your Super draft legislation, Australian Institute of Superannuation Trustees chief executive Eva Scheerlinck said the proposed laws were “the wrong way around” and should focus on winding up underperforming funds before workers were “stapled” to a single super account for their entire working lives.
“The new laws will see many disengaged members stapled to dud super products where they could languish for years,” Ms Scheerlinck said.
“Underperformance in our super system must be substantially addressed before any stapling occurs.”
In its response to the government’s consultation on the laws, the institute cited SuperRatings research which revealed that a fund member with a $73,000 salary and $140,000 super balance would be almost 40 per cent, or $34,200, better off through being invested in several high-performing funds rather than one underperforming fund over a seven-year period.
Ms Scheerlinck said disclosing the performance statistics of their fund was not sufficient protection for consumers who could be stuck in an underperforming fund permanently if the legislation was passed in its current form.
“When it comes to complex financial products such as superannuation, the Productivity Commission, ASIC and the Hayne Royal Commission have all previously warned about the dangers of relying heavily on disclosure to improve consumer outcomes,” she said.
Ms Scheerlinck added that the government should adopt the Productivity Commission’s recommendation within the laws and give the regulator the power to wind up underperforming funds.
The AIST submission further pointed to the legislation’s focus on MySuper products, which had generally performed better than Choice fund options, when it came to benchmarking performance.
“The bill takes a soft approach to super fund underperformance – it applies performance assessment and disclosure to MySuper products only,” the submission said.
“Underperforming choice products – examples of which stunned the community during the [royal commission] – are left to be determined by regulations and it is unclear what products will be covered. This leaves a substantial proportion of underperforming products unscrutinised.”
