The government’s Your Future, Your Super reforms weren’t on anybody’s radar ahead of Tuesday’s budget, with speculation instead focusing on a potential freeze to the SG increase (unlikely), a third tranche of early release (more likely) or new legislation aimed at closing the super gap for women.
The package will mean the creation of a single superannuation account that is “stapled” to every worker, preventing duplicate account fees, and compel funds to provide greater transparency for members in how their money is being spent.
“By 1 July 2021, super trustees will be required to comply with a new duty to act in the best financial interests of members,” Treasury said.
“Trustees must demonstrate that there was a reasonable basis to support their actions being consistent with members’ best financial interests.”
That could be a thorn in the side of a number of industry super giants, who have faced a whirlwind of criticism for their funding of loss-making media organisation The New Daily as well as spending on large advertising campaigns intended to preserve the legislated increase to 12 per cent. Funds have previously defended that spending as being necessary to provide financial information to members, but it’s unclear whether that excuse will fly in the face of greater regulatory scrutiny.
At the heart of the Morrison government’s fear of the industry funds is their ability to bring billions to bear on marketing campaigns designed to push their agenda in Canberra. These reforms could negate some of that spend, and make it substantially easier for the government to push through a cut or freeze of the SG increase while (rightly) exposing funds’ spend on organisations like The New Daily.
The reforms will also mean that funds will be required to meet an annual performance test under the guidance of APRA. Underperforming funds will have to notify members of their “dud” status, and potentially be banned from taking on new members until they lift their game.
That change – in combination with the direction powers APRA has been threatening to unleash for some time now – could drive greater consolidation across the fractious superannuation sector as smaller funds are snatched up by their larger peers, potentially creating a much tougher adversary for the Morrison government. And while the measures are currently limited to MySuper products, they’ll be expanded to other products come July 2022.
The reaction to the reforms from within the industry has been mixed, with many welcoming the stapling of accounts while also questioning how effective the underperformance measures will be.
“We don’t suffer from a shortage of good funds and we need to ensure that these measures don’t reduce competitive intensity or damage the nation building role of superannuation,” said Association of Super Funds of Australia CEO Dr Martin Fahy.
“In the absence of the release of the Retirement Income Review and the lack of specificity in the Budget papers, it is unclear how the changes will work in practice or what the implications will be for competition, efficiency and incumbents in the sector.”
