The Your Future, Your Super measures could hurt members if the government doesn’t fix its approach, according to the Australian Institute of Superannuation Trustees (AIST).
New stapling measures contained within the Your Future, Your Super reforms risk leaving members worse off if more isn’t done to fix underperformance within the industry, according to AIST CEO Eva Scheerlinck.
“If stapling occurs before underperformance is substantially addressed, members who are currently in underperforming funds will be stapled to those funds,” Ms Scheerlinck said in a Treasury submission on the reforms.
“Sequencing the measures to address the worst examples of underperformance prior to introducing stapling would reduce member detriment from this.”
The AIST also believes closing underperforming funds to only new members risks making outcomes worse for the remaining members and that the regulators should instead look to more actively protect members, in line with the Productivity Commission recommendations which said that “APRA should take decisive action to oversee or direct a transfer of members to a better fund.”
“It is important that policy changes to a mandatory retirement savings system be made in the best interests of super fund members and address the areas for improvement in the system identified by the Productivity Commission,” Ms Scheerlinck said.
“We are concerned that without further consideration, and some additional steps, the implementation of the Your Future, Your Super measures may result in consequences that weaken their policy intent and lead to unintended outcomes for members.”
Ms Scheerlinck also called for performance benchmarks to reflect underlying investments, echoing concerns that the reforms could drive funds towards passive investing and increase sequencing risk for members.
“The annual performance assessment benchmarks should accurately reflect the underlying investments,” Ms Scheerlinck said.
“Inappropriate benchmarking risks driving behaviour to track the benchmark allocations which in turn would lead to poorer returns to members."