While the Financial Services Council (FSC) has welcomed the Your Future, Your Super reforms which were passed by the Senate on Thursday, Industry Super Australia (ISA) and the Australian Institute of Superannuation Trustees (AIST) believes workers could be the big losers from the passage.
FSC chief executive, Sally Loane, said the council supported the “stapling” recommendation as having a single superannuation account would save Australian workers up to $1.8 billion in fees over the first three years.
Loane also pointed to the performance benchmarks for super products and said this would work alongside stapling to give members “confidence” their super was generating “best in show” investment returns.
“The challenge now for the regulators and Government is to ensure performance assessments use rigorous and comparable data for all products so that comparisons are undertaken on a ‘like-for-like' basis,” she said.
However, ISA said at least 2.6 million super fund accounts were locked in funds that could fail the performance test.
It also said over $500 billion of members savings were “shielded” from the performance test and that it would push the Government to ensure the funds they carved out were included in the test.
ISA chief executive, Bernie Dean, said: “We’ll monitor the impact of the bill and may press future Parliaments to mandate that Australians can only be stapled to the best-performing funds and not the worst ones.
“After almost universal criticism the government was forced to drop a number of ideological proposals and to improve the performance tests for funds, but sadly it stopped short of protecting workers from losing their savings by being stuck in a dud super fund.”
Similarly, AIST chief executive, Eva Scheerlinck, said: “AIST remains deeply concerned that these legislative carve outs provide incentives to unscrupulous providers to push high fee, under-performing products onto unsuspecting consumers.
“Many Australians could remain stapled to dud products for life and be none the wiser as their super fund won’t be subject to performance testing.”
She said addressing underperformance should be the responsibility for the regulator, not consumers.
“Expecting all members in an underperforming fund to respond to a letter and take appropriate action places a huge burden on individuals to ‘fix’ their super,” Scheerlinck said.
“While some may respond, many will not, in particular vulnerable Australians, leaving them languishing and stapled to an underperforming fund, compounding disadvantage and reducing their retirement balances.”
The FSC also welcomed the Senate’s passage of the ‘More Flexible Super’ reforms.
“The changes to contribution arrangements for older Australians will make it easier for them to manage their superannuation and retirement planning,” Loane said.
“We were also pleased to see the Government support amendments tabled by Pauline Hanson’s One Nation to allow individuals who withdrew superannuation during the COVID-19 crisis to recontribute those amounts without being penalised. This is consistent with FSC advocacy as part of a holistic response to the COVID-19 early release scheme.”