Assistant Treasurer and Minister for Financial Services Stephen Jones announced last week that the Treasury will undertake a review of the operation of the Your Future, Your Super laws (YFYS laws) after the second round of MySuper performance tests have taken place by August this year.
In a public statement, Mr Jones said while funds must always be held accountable for their performance, accountability mechanisms must not simultaneously create perverse or unintended outcomes for members.
“The government is aware of concerns that the YFYS laws have the potential to create such outcomes by discouraging certain investment decisions or certain infrastructure investments,” he stated.
“Treasury will be tasked in its review to examine and consider the operation of the new laws in this context.”
With two rounds of annual tests completed, Mr Jones said the review will consider whether the performance test has had any significant unintended consequences for MySuper products and assess how the test should be applied to other superannuation products.
Following the decision to review the operation of the performance test, the government has also announced it will pause its extension beyond MySuper products for 12 months.
“This will provide time for the review to take place and for the government to consider and consult on any changes to ensure the test is fit for purpose given the significant variety and complexity of these products,” said Mr Jones.
The review will not unwind ‘stapling’ measures which reduce the proportion of duplicate accounts, or remove the requirement for trustees to meet high performance and probity standards.
As part of the review, Treasury will be undertaking public consultations, with the details to be released soon.
Commenting on the announcement, the Association of Superannuation Funds of Australia (ASFA) said it welcome the government’s announcement of a Treasury review into the operation of the Your Future, Your Super (YFYS) Laws and the associated My Super performance test.
“The review is timely and appropriate. It is a positive move that will help improve accountability and performance of the wider superannuation system,” said ASFA CEO Dr Martin Fahy.
“After two years of operation it will allow the impact of YFYS measures on capital allocation to be assessed and address the challenges it presented for infrastructure and ESG-focused investments.”
Mr Fahy said ASFA has consistently raised concerns that the benchmarking approach adopted would have unintended consequences and distort capital allocation in a manner which was at odds with delivering strong member outcomes.
“If left unchecked, this would result in Australians having less in retirement. We are pleased that the new government has acted quickly and will review the test so that it works in the long-term interests of fund members,” concluded Dr Fahy.
