‘No justification for overreach’: ASFA
The Association of Super Funds of Australia (ASFA) believes that the Morrison government should consider the findings of the royal commission before instituting sweeping super reforms.
ASFA believes that the low level of misconduct uncovered by the royal commission means that the government should rethink its approach to instituting the Your Future, Your Super reforms, while agreeing with the changes in principle.
“ASFA supports the objective of ensuring good governance of super funds and addressing underperformance. It is important, however, that the performance of Australian superannuation funds is put into perspective,” ASFA said in its submission to the Treasury.
“The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (royal commission) made the fewest number of recommendations with respect to superannuation — nine — of which one related to the regulators and not to superannuation fund trustees.”
ASFA also railed against the introduction of new regulations that could prohibit certain payments and investments — even when they’re in the best financial interests of members — saying “there is no justification for this overreach” and noting that commissioner Kenneth Hayne was against the introduction of such a rule.
“Given this explicit finding by commissioner Hayne, we query why draft section 117A is being inserted into the SIS Act, in conflict with the express findings of commissioner Hayne,” ASFA said.
ASFA also believes that the “significance of the consequences of failure” and the risk of unintended consequences arising from the new underperformance test mean that the government should commit to a two-year trial period.
“Facilitating an orderly transition would be in the interests of fund members — by way of contrast, the mechanisms proposed in the exposure draft legislation are likely to have undesirable consequences for members’ benefits,” ASFA said.
“This would allow the performance test and/or benchmark methodology to be refined if necessary, and will have the added benefit of measuring performance over a 10-year period.”
ASFA also raised the alarm over the exclusion of administration fees from the performance test, echoing the sentiments of a number of other industry bodies along with AustralianSuper boss Ian Silk, who called the decision to exclude admin fees “an oversight”.
“It is important that if a single benchmark methodology is going to be employed then it should include all fees charged against members’ accounts (other than activity fees, e.g. for a family law split), in particular administration fees,” ASFA said.
“Like investment returns, the deduction of administration and other fees from a member’s account has a material effect on member outcomes and this effect should be reflected in any benchmarking methodology if a single metric is to be used.”