Tweaks will help but the YFYS benchmarks need a redesign: industry association
A major rework is needed to strengthen the super performance test, says one of Australia’s largest industry bodies.
Industry SuperFunds said the government announcement that it will extend the all-important Your Future, Your Super benchmarking period from eight years to 10 years better reflects the long-term nature of super fund investments.
It also stated that no further delays to testing the Trustee Directed Products is a welcome move, however large swathes of the poorer-performing Choice sector will remain shielded assessment – including all products in the decumulation phase.
“The government should commit to all APRA-regulated funds being tested, including those in the retirement phase from this year.,” it said in a statement.
“All members deserve to know if their fund is a dud including retirees. It is disappointing that historical administration fees remain carved out of the test.
“The Your Future, Your Super performance test only includes one year of administration fees – which leaves the test ripe for fee gaming and manipulation. Including 10 years of administration fees, like they do with other fee types, was a simple change that could have been made before the next benchmarking begins in August.”
It continued the draft regulations adding new benchmarks to better reflect underlying assets may also limit the scope for test manipulation of funds misclassifying assets.
“The government has acknowledged teething issues with the stapling administration and put in place processes to streamline it,” it continued.
“However, members are still being stapled to dud funds that have failed the performance test – which has the potential to cost them more than $200,000 at retirement.”
Industry SuperFunds said more than 850,000 members stayed with their fund that failed the 2021 test, costing those members a combined $1.6 billion in just 12 months.
Industry Super Australia deputy chief executive Matt Linden said it is disappointing for millions of members whose funds won’t face a performance test that they will continue to be kept in the dark.
“In a compulsory system, disengaged members should not be left languishing in a dud super fund. The government needs to upgrade consumer protections, so members are only stapled to the best funds, who have passed the performance tests.”
