AustralianSuper has questioned why dividends don’t fall under the scope of the Your Future, Your Super reforms while warning that some funds may try to game the new performance benchmarks.
AustralianSuper warned that the decision to exclude dividend payments made by retail funds from the new best financial interests test doesn’t reflect the goal of the reforms “in any sense”.
“Both the Productivity Commission and the Hayne Royal commission identified such payments as inconsistent with members’ best interests,” said Sarah Adams, AustralianSuper group executive for brand and reputation, in the fund’s submission to Treasury.
“The explanatory materials accompanying the bill fail to demonstrate how the estimated $10 billion diverted from members’ retirement savings annually can be in members’ best financial interests.”
AustralianSuper also warned that the scope of the new performance test is too narrow, with a focus on “net investment performance” rather than “net benefit” and that the chosen benchmarks could see funds adopting investment approaches that would harm member’s financial interests over the long-term.
“Funds may anchor their strategy to the stated benchmark, restricting the investment approach. For example, with unlisted assets and specifically infrastructure, the proposed FTSE listed infrastructure benchmark has little Australian infrastructure, and could encourage funds not to invest in projects which would otherwise support the Australian economy,” Ms Adams wrote.
“Funds may seek to game the benchmarking in an attempt to demonstrate ‘outperformance’ on the proposed benchmarked test. For example, by setting an SAA for benchmark which is easier to outperform.”
The government’s decision to exclude administration fees has been controversial for a number of industry bodies, which questioned whether it unfairly favoured retail funds, while AustralianSuper chief executive Ian Silk called it “an oversight” in his appearance before the standing committee on economics.
One of the peak superannuation bodies has claimed that industry funds have “significantly outperformed” their retail counterparts and ca...