04 May Government announces overhaul of super performance test
The government has announced an overhaul of the superannuation performance test to capture admin fees and to provide certainty to funds looking to invest in domestic infrastructure and unlisted property.
Fund administration fees will now be included in the government’s underperformance test for superannuation funds, which is scheduled to roll out for 1 July 2021, Treasurer Josh Frydenberg announced on Wednesday.
Moreover, the government’s last-minute amendments will see investments in domestic infrastructure and property assets declared safe, following concerns the super sector could be discouraged from investing in these assets for fear of being labelled an underperformer.
“This will improve the accuracy of the performance test, strengthen the focus of the test on investment outcomes delivered to members, and ensure that Australian superannuation funds can invest with confidence in these domestic assets,” Mr Frydenberg said in a statement.
In announcing the overhaul, the Treasurer also formally launched the exposure draft consultation process, due to close on 25 May.
The regulations released for consultation include:
- Outline the methodology for the annual performance test and reopening test, as well as requirements for notifications to members.
- Prescribe the definition of a ‘stapled fund’, including tie-breaker rules for determining which fund is to be an employee’s stapled fund where they have multiple existing funds.
- Specify the formulas as a basis for ranking products on the YourSuper comparison tool.
- Set out the manner in which the portfolio holdings disclosures are organised.
- Prescribe the information that must be included with the notice of an annual members’ meeting.
- Further strengthen the prohibition on funds offering inducements to employers.
Super Consumers Australia was quick to welcome the Treasurer’s announced overhaul, noting that the most relevant outcome for people is how substantial their savings are in retirement.
“Admin fees are one of the biggest drains on people’s retirement savings, so we strongly welcome their inclusion in the test. Treasury modelling shows including admin fees will turn up the heat on even more funds, in a move that is likely to drive fast improvements to the super savings of a million more people,” Xavier O’Halloran, director of Super Consumers Australia, said.
Mr O’Halloran did, however, note that more work remains to be done.
“Currently, not all investment options face scrutiny. This needs to change and be enshrined in legislation. It also gives wide discretion to the Minister of the day to ban investments.
“We think scrutiny is a good idea, but we’d be better served by a regulator following a clear process. In the interests of transparency and probity, we recommend that APRA and ASIC jointly exercise this discretionary power under a similar regime to other financial products they regulate,” Mr O’Halloran concluded.
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Article by Maja Garaca Djurdjevic on 28 April 2021 – nestegg.com.au
