While Mr Jones said that dud funds would find no “safe harbour” were Labor to win government, he warned that the customer charge benchmarks included in the Your Future, Your Super reforms only measure investment fees while excluding administration fees – a “glaring anomaly” that could see the system go backwards.
“This is a massive design fault which runs the risk of enabling funds to divert costs and charges from one line item to another without addressing the underlying problem of high fees,” Mr Jones told the Australian Institute of Superannuation Trustees (AIST).
“In other words, members can and most likely will still lose out from oversized fees.”
Mr Jones also believes that the government’s proposed performance benchmarks will discourage funds from investing in infrastructure for Australia’s economic recovery and turn them back to the ASX 200 and other passive investments.
“They encourage short-term returns and a ‘hug-the-index’ investment approach, rather than a long-term, multi-decade view,” Mr Jones said.
“This is crazy at a time when our tradies need work, our nation needs rebuilding and the next generation of retirees need dependable returns.”
Mr Jones called the government out for dragging its feet on instituting anti-hawking provisions for superannuation despite the recommendations of the royal commission and warned that the Your Future, Your Super reforms will create “a perfect ecosystem” for deception and exploitation. The government also copped a spray for its attempt to “backslide” on the legislated increase to the superannuation guarantee and its ongoing war of words with the industry funds.
“These attacks have yielded nothing of substance, and I hope that this budget serves as a circuit breaker in that phony war,” Mr Jones said.
The Your Future, Your Super reforms, unveiled in last week’s budget, will compel underperforming funds to inform their members and bar them from taking on new members if they don’t lift their game. Funds will also be required to provide greater transparency around how they spend members’ money.
What a flawed proposal this is: Glaring issues are:
1. It will only be benchmarking the Mysuper product. In many cases they are comparing apples to oranges as some of the “poorer” performing funds have a lower % of growth assets. APRA needs to have clear guidelines about what can and can’t be called conservative assets (and the income from realestate should not be classed as a conservative asset) and limit all MySuper balanced products to 70% growth assets.
2. Any annual league table will encourage investment managers to think short term, when it will be in their members best interest to think long term.
3. Super funds will be encouraged to push the envelope in terms of risk.
Not often I agree with Labor, however there are a couple of solid points here.
If only they (Labor) didn’t turn a blind eye to the issues with the industry funds in the first place. Sadly both major parties approaches to superannuation have major issues for the average person.
Labor’s financial services spokesman Mr Jones is apparently unaware of the “sole purpose” requirement. Super is for the members’ retirement only and not a vehicle for indirectly implementing goverment policy for the benefit of unrelated tradies and national rebuilding agenda. It should also be noted that if the Your Future, Your Super benchmarks are to be measured annually, it is these that will drive funds to a short run investment strategy. Younger Australians need consistent returns over the longer term to benefit from compounding of earnings.