Trustees challenged to meet stricter return targets

Superannuation trustees have not given consumers in default funds the returns they are entitled to expect, according to chair of the Stronger Super Peak Consultative Group, Paul Costello (pictured).

“We have created a system – and we are all part of it – which has sub-optimally managed the assets of those people,” he told delegates at an Association of Superannuation Funds of Australia (ASFA) function.

Costello argued funds should be measured on more than just the monthly leagues tables published by the Australian Prudential Regulation Authority (APRA) – they should also be required to meet both risk and performance targets.

“The trustee offering of MySuper should be required to set out what they determine an acceptable level of risk is and set out what they expect to be the risk-adjusted 10-year rolling return,” Costello said.

He also said trustees should ask what is an acceptable level of risk-taking they would deliver against, and then uphold the expectation to manage portfolios accordingly.

Trustees should also communicate these targets with members to make the process both more accountable and transparent.

Costello said the challenge now for trustees was to come up with better, clearer, more effective and more accountable MySuper products that incorporated these ideas.

“I would argue that that represents both an extraordinary challenge and opportunity for the industry,” he said.

Costello said that consultation on the proposed regulations ended on 30 May, and trustees could expect to see legislation in the second half of the year.