Superannuation funds to face competitive test

Superannuation funds will have to virtually compete on fees and performance to attract members under a new regime foreshadowed by the Federal Government in tonight’s Budget.

Under the Your Future, Your Super package regime announced by the Federal Treasurer, Josh Frydenberg announced an annual objective performance test for superannuation funds.

As well, superannuation funds will be required to hold Annual Members’ Meetings in the same fashion as the annual general meetings of publicly-listed companies.

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He said that those funds that failed to meet those test objectives and were regarded as persistently underperforming would be prevented from taking on new members.

“To protect members from poor outcomes and encourage funds to lower costs the Government will require superannuation products to meet an annual objective performance test,” he said. “Those that fail will be required to inform members. Persistently underperforming products will be prevented from taking on new members.”

“The Government will increase trustee accountability by strengthening their obligations to ensure trustees only act in the best financial interests of members. The Government will also require superannuation funds to provide better information regarding how they manage and spend members’ money in advance of Annual Members’ Meetings,” Frydenberg said.

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Goes to show how financial illiterate the govt is, how do you compare Superfunds you are assuming all funds invest the same and/ or all they have 5 risk profiles to invest in, People whom are in retail or Industry funds who choose their investments individually are not using standard one size fits all models. How are they going to stop superfunds from taking on members . I think they meant well, but!!!!

Although it is still new and will have its “teething” issues accountability for super Funds is well overdue
Industry funds that support and are supported by Unions and spend millions of members funds on advertising will no doubt “winge” the loudest but it’s way overdue for all funds to be accountable on how they perform and what it really costs Retail and Industry alike

Absolutely. If a Wrap account member has just gone backwards 20% because the member or their adviser has picked all growth and it is a bad year, what the hell has that got to do with the super fund? Surely they must be talking rules for funds to be chosen as default funds, maybe? Otherwise, as ad implies, they're comparing apples and emus.

I think it just relates to the actual Mysuper option, ie the default option within the fund?

Yes true but my super is not just one option. Secondly they said (think) that it would be rolled out to other funds later.

How can you compare when risk is not taken into account and what does "perform"mean. Is it risk adjusted (I bet no), does it account for unlisted assets vs listed (I bet not), how does it impact the client, ie. a 65yo about to go into pension phase or a 22 yo who just started work and cant access the funds for 38 years!!!!'

This is continued idiocy and ignorance from a government that doesn't even have a basic understanding of what it is regulating.

I have no issue with accountability but its exactly the same as saying a house is too expensive and the price must come down çompared to another and ignoring one is a waterfront, you have to compare all aspects, not just a single number.

It looks to me like options/funds that consistently underperform their own objectives yet don't inform members and continue to take on new ones - hopefully that's what it means because that sounds like a decent amount of accountability similar to what fund managers and advisers have to own up to, funds themselves shouldn't ignore their own failures but I hope this won't lead to comparing apples and oranges, mistakenly chasing returns etc

Will make them less competitive and to refrain from taking risks !

I'm reminded of the term "Chasing the best performers". It is very rare that last year's best performer will be this year's best performer, and I can almost envisage a system where client's Super will be changed to a better performer one year, only to be changed to a different fund the next, ...and the next, and the next.

This is going to be a lot of fun, just you wait and see.

I was about to blow my lid at this lunacy but I noticed the word "objectives" - are they merely talking about funds that consistently underperform their own objectives? That doesn't sound as hellish if that's the case but I have very little trust left

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