ISA outlines concerns about ‘loopholes’ in super fund performance measures
While Industry Super Australia supports the super fund performance measures announced in the budget, it has raised concerns that certain administration fees and other hidden charges may be exempt from the benchmarking tests.
ISA chief executive Bernie Dean said while Industry Super Australia has welcomed the federal government’s plans to act on fund underperformance by using performance tests to identify dud funds, the reforms, it believes, need further refinement.
“Without refinements to make it more robust, the government’s performance test could end up costing many people hundreds of thousands of dollars from their retirement,” Mr Dean stated.
“The reforms at present will allow the duds to keep fee gouging as their administration fees and other hidden charges are exempt from the tests. Excluding any type of fees from such an important test would be a big mistake.”
Mr Dean noted that the only measure that matters to what Australians have at retirement is what members get into their account.
“That is investment returns, minus fees, costs and charges — anything else is illogical,” he said.
“Alarmingly, a loophole will allow the worst performers to slip through the net. The consequence for repeated failures should be removal from the system.”
While the government’s proposal is to ban funds that repeatedly fail the tests from taking in new members, Mr Dean stated that this does little to get members out of those funds.
“We need to do better than that,” he said.
“The government is headed in the right direction, and with some refinements to their proposals, Australians’ savings will have stronger protections.”
