The Australian Council of Superannuation Investors (ACSI) said that the clarification of “best financial interests” over the existing best interest duty was “unnecessary and could create uncertainty”, and that most funds already carefully considered whether expenditure was in their members’ best interests.
“Without additional guidance, this will likely cause trustees to undertake a higher level of due diligence than is necessary, creating unnecessary red tape and ultimately adversely impacting efficiency and member fees, contrary to the policy intent underpinning the exposure draft,” ACSI chief Louise Davidson wrote in its submission to Treasury.
“An alternative that would meet the policy intent of ensuring trustees act in the best financial interests of beneficiaries could be to ask trustees to disclose to beneficiaries the governance arrangements they have in place to ensure payments made are in the best interests of beneficiaries.”
ACSI also said that the proposal to add additional regulations that would allow the Treasurer to unilaterally ban super fund investments regardless of whether they were in the best financial interests of members was “fatally flawed” and could “adversely affect investment activity”.
“This proposal also has potentially far-reaching consequences. Superannuation funds are large institutional investors, and investment favours certainty. The proposal acts to create unnecessary uncertainty for investment, with the potential for significant change to permitted payments or investments to be made via regulation,” Ms Davidson wrote.
Ms Davidson recommended that the power be removed from the draft exposure before it entered Parliament – a recommendation that has not been implemented – saying that regulations should “address detail only” rather than “seeking to circumvent the legislative process with a potentially far reaching prohibition.”