It’s a phrase we hear often, isn't it? "At your expense." Usually, it’s a warning, a heads-up that something isn't quite right, that someone else is benefiting while you're footing the bill. In the world of superannuation, this sentiment has been echoing quite loudly lately, particularly with the introduction of the Your Future, Your Super reforms.
Industry Super Australia (ISA), a collective voice for a significant chunk of Australia's super funds and their millions of members, has been watching these reforms closely. Their aim, and indeed the aim of all good super funds, is simple: to make sure your retirement savings grow as much as possible. They broadly support the idea behind the reforms – a fairer, more efficient system for everyone. But, as they’ve pointed out, the reality hasn't quite lived up to the promise.
Take the performance test, for instance. The idea of a test to weed out underperforming products sounds sensible, right? We all want our money working hard for us. However, ISA argues the current test is falling short. It’s not really capturing what matters most to members – products that manage risk well and deliver solid long-term returns. And, worryingly, there's evidence of funds finding ways to 'game' the system, picking benchmarks and setting fees in their favour. Relying on members to simply move out of bad products isn't working, and some products are only just scraping by, passing the test by the skin of their teeth. The information presented to consumers often doesn't clearly show which products are genuinely adding value and which are actually costing members money. ISA believes there need to be more serious consequences for funds that consistently underperform or just barely pass.
Then there's the YourSuper comparison tool. On paper, it's meant to be a helpful guide for people wanting to get a handle on their super. But, as it stands, it can be a bit of a minefield. The way it's set up, with default sorting methods, can actually mislead users, undermining its very purpose of empowering informed decisions.
And what about stapling? The idea was to stop people from accumulating multiple, often forgotten, super accounts. A good intention, no doubt. But it's led to some entirely foreseeable problems. Members have been 'stapled' to underperforming products, and individuals in dangerous occupations might find themselves with inadequate, or even no, insurance cover through their super. This isn't what anyone wants for their members, and ISA suggests there are better ways to manage this, ways that connect people to quality products rather than leaving them stuck.
Finally, the 'best financial interests duty'. Everyone agrees trustees should act in the best financial interests of members. But ISA highlights that the way this duty has been implemented has led to significant, unnecessary expenses and lost opportunities – costs that ultimately land on members. The current approach doesn't always focus on the spending that truly impacts members' financial outcomes. It can overlook payments of profit and assumes 'essential' payments need less scrutiny, even when evidence suggests related-party arrangements might not be in members' best interests.
It’s clear that while the intention behind these reforms was to improve retirement outcomes, the execution has left room for improvement. For members' superannuation to truly be their future, the system needs to be transparent, effective, and genuinely work in their favour, not at their expense.
