It feels like every few years, the rules around our superannuation get a bit of a shake-up. The 'Your Future, Your Super' reforms were a big one, aiming to make things fairer and more efficient for all of us. And honestly, who wouldn't want their retirement savings to grow as much as possible?
One of the key changes brought in was an annual performance assessment for MySuper products. This is a pretty big deal, as it puts a spotlight on super funds to ensure they're hitting certain performance benchmarks. It’s about accountability, making sure trustees are doing their job to maximise our nest eggs.
Now, Industry Super Australia (ISA), which represents a whole bunch of those familiar Industry SuperFunds and their millions of members, has been looking closely at the proposed regulations that flesh out these reforms. They broadly support the idea behind 'Your Future, Your Super' – who wouldn't want a better, fairer system? – but they've flagged some areas that they believe need more attention to truly benefit members.
It seems the current draft regulations, specifically the Superannuation Industry (Supervision) Amendment (Your Future, Your Super – Addressing Underperformance in Superannuation) Regulations 2023, aren't quite hitting the mark for ISA. They're urging the government to make some significant tweaks, and soon, rather than just tinkering around the edges. The worry is that delays and piecemeal changes create uncertainty for both the industry and, more importantly, for us members and our future retirement outcomes.
So, what are some of the key points ISA is raising?
The Comparison Tool Conundrum
One of the most immediate concerns is the YourSuper comparison tool. Right now, it defaults to sorting products by annual fees, from lowest to highest. ISA strongly believes this is misleading. Imagine you're looking for the best returns, but the tool shows you the cheapest options first. They're pushing for the tool to default to sorting by net returns – from highest to lowest – before the 2023 performance test results are even published. For products with different stages, like lifecycle funds, they suggest ranking based on asset-weighted returns across those stages. It makes sense, doesn't it? You want to see what's actually growing your money the most.
Looking Long-Term
ISA also supports extending the performance testing period from eight to ten years. The idea here is to encourage funds to think and invest with a longer horizon in mind, rather than focusing too much on short-term fluctuations. It’s about building sustainable growth, not just chasing quick wins.
Simplifying the Test
There's also a concern that adding extra benchmark indices and voluntary reporting might actually make the performance testing regime less transparent and more open to 'gaming'. ISA's suggestion is to replace the current product-specific benchmarks with a simpler, 'naïve' benchmark for all MySuper products. This would be a basic, low-cost diversified portfolio, designed to clearly show whether trustees are genuinely adding value beyond just market movements.
Fees and Other Considerations
They're also advocating for administrative fees and costs to be aligned with the performance test's lookback period. The current approach, which largely ignores fees beyond the last 12 months, doesn't fully reflect the member outcomes delivered over the longer testing period. And when it comes to funds that fail the performance test, while ISA supports the proposed letters to members, they also want the comparison tool fixed to avoid directing people towards underperforming products in the first place. They're also keen to see reforms that prevent software providers from undermining the stapling reforms, which aim to keep you with your chosen super fund when you change jobs.
Ultimately, ISA's message is clear: the 'Your Future, Your Super' reforms have a good intention, but the current implementation needs refinement. They're calling for a more cohesive and substantial package of reforms to ensure the superannuation system truly works in the best interests of its five million members.
