Govt ‘backflipped’ on last minute YFYS changes: ISA
The Government “backflipped” with last-minute changes to the Your Future, Your Super (YFYS) performance test, which will only include the previous year’s administration fees instead of an eight-year average, according to Industry Super Australia (ISA).
Bernie Dean, Industry Super Australia (ISA) chief executive, said “creative book-keeping” could allow funds to charge members the same fees but pass the test.
“The Government’s last-minute changes to crucial super fund performance test will allow fee gougers to continue ripping off members,” Dean said.
“This not only allows dud super funds to whitewash years of fee gouging it also gives unscrupulous players free reign to fiddle the books and shift costs to the investment side with little impact on its performance assessment.”
Scott Hartley, AMP Australia chief executive, praised the decision and said using administration fees from the most recent financial year in calculating the annual performance test, rather than an eight-year average, would encourage further reductions in fees by super funds.
“While some superannuation providers such as AMP have significantly reduced their fees over the past several years, other funds have increased their fees, particularly after the introduction of the Protecting Your Super legislation,” Hartley said.
“The Your Future, Your Super legislation will help ensure super funds deliver better outcomes for their members.
“Using administration fees from the most recent financial year in the calculation of the annual performance assessment is sensible.
“It will ensure funds can be assessed on the fees that they are presently charging members and acknowledges the inconsistencies in the historical recording of fee data across funds.”
Dean said the initial YFYS package excluded administration fees from the performance test.
“Which are huge profit-generators for retail funds, and now on the eve of the performance test assessment it has weakened the test in favour of the for-profit sector,” Dean said.
“The more than $10 billion profit retail funds cream off the top, was also excluded from scrutiny under the legislation’s revamped Best Financial Interest Duty test.
“And more than $500 billion of members savings are still shielded from performance tests – including products that were savaged during the Banking Royal Commission.
“At least 2.6 million super fund accounts are locked in funds that could fail performance tests – many more workers are in funds that will not be tested.”
Dean said amendments to the YFYS package which included mandating that Australians could only be stapled to funds that passed the performance test had also been pushed by the association.
“Without this change the bill could cost Australian workers up to $230,000 from their savings,” Dean said.
The ISA also criticised another change in the regulations which allowed the “deliberate watering down” of the letter a member receives from funds that fail the test.
“Instead of encouraging a member to seek a different fund the member is now being marshalled towards another product the underperforming fund offers, one that may not be subject to a performance test,” Dean said.
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