New consumer protections in super welcome but should go further
Enhanced superannuation trustee obligations and regulatory powers announced today should benefit consumers but there is scope to go further, says Industry Super Australia.
Chief executive David Whiteley said: "Industry super funds will always support measures to enhance consumer protections and member interests”.
“We are concerned, however, that the changes do not go far enough, particularly on ‘Choice’ super products, unpaid super and multiple accounts," he said.
The proposals announced by Financial Services Minister Kelly O’Dwyer will toughen obligations introduced in the 2013 Stronger Super reforms for default MySuper products, but won’t substantially lift standards for the nearly $1 trillion in APRA-regulated assets outside the MySuper sector.
“We welcome the emphasis on transparency and accountability, and urge the regulator to use the powers to investigate the cause of bank-owned super fund chronic underperformance,” said Whiteley.
Industry Super is concerned the changes are largely restricted to MySuper funds, with the majority of member savings overseen by bank-owned super funds held in typically underperforming "Choice" products.
“When a persistent 2 per cent underperformance can potentially mean $200,000* less in super at retirement for the average worker, APRA has to step in,” he said.
An Industry Super analysis of official APRA data shows:
- 97 per cent of all public offer bank-owned fund member accounts are in funds with below median returns
- 94 per cent of all public offer bank-owned fund assets are in funds with below median returns
"This litmus test for this legislation will be the extent to which the regulator can now explain two-decades of bank-owned super fund underperformance against industry super funds”.
“The regulator must ascertain whether bank-owned super funds are prioritising shareholder interests over fund member interests, and the implications of this on retirement savings”.
Industry Super has welcomed the adoption of the Fraser Review recommendation that funds hold annual member meetings. However, the modest measures announced on unpaid super are disappointing.
“While the government is looking to address issues regarding salary sacrifice, it remains silent on the more significant issue unpaid SG affecting over three million Australian workers,” said Whiteley.
The Government's efforts to increase members opting out of default insurance are notable but a more effective mechanism would be to implement a plan to auto-consolidate multiple accounts.
*ASIC Money Smart calculator - start age 27, retire age 67, income $80,000 starting balance zero. Balance with investment returns of 4.5% = $442,402. Balance with investment returns of 6.5% = $663,270. Difference= $220,868 (Current dollars CPI deflated).
David Whiteley is available for interview. Media contact: Phil Davey 0414 867 188
Industry Super Australia provides policy, research and advocacy on behalf of 15 not-for-profit Industry SuperFunds who are the custodians of the retirement savings of five million Australians.
Industry Super Australia Pty Ltd ABN 72 158 563 270, Corporate Authorised Representative No. 426006 of Industry Fund Services Ltd ABN 54 007 016 195 AFSL 232514