Retail funds escape scrutiny
Industry super funds and unions fear millions of workers will be “stapled” to a dud fund.
The Morrison government’s latest superannuation law changes will require most superannuation products to meet an annual performance test.
Those that fail will be required to inform members. Persistently underperforming products will be prevented from taking on new members.
However, not all funds will face the performance test, with industry funds subjected to higher scrutiny than bank-owned retail funds – at least in the initial stages.
The government claims it intends to extend the performance test to retail funds in the future.
But Industry Super Australia (ISA) Chief Executive, Bernie Dean, said more than $500 billion of members’ savings are shielded from performance tests – including products that were savaged during the banking royal commission.
“ISA will be pushing the government to ensure the funds they carved out – which are some of the worst in the system – are quickly included,” he added.
Australians need to engage with their super
ISA is also worried that workers will be permanently tied to underperforming funds.
In its superannuation law changes the government has sought to “staple” employees to a single fund, which would follow them from job to job.
From 1 November 2021, when an employee starts a new job but does not nominate a super fund to receive contributions, their employer is required to make contributions to their existing super fund, if they have one.
The government says this will reduce the number of people with multiple accounts – each with a set of fees.
However, Dean says this means at least 2.6 million super fund accounts are locked in funds that could fail performance tests.
“ISA pushed for sensible amendments that would have mandated that Australians can only be stapled to funds that pass the performance test,” he says.
“Instead, the government has given poor super products a leg-up at the cost of the workers they are fleecing with their high fees and lousy performance.
“This means it is even more important that Australians engage with their super and find a high-quality fund with low fees and good returns.
“We will 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.”