The government has tabled the bill setting up the Compensation Scheme of Last Resort, after the Minister for Financial Services, Stephen Jones, announced on Wednesday the government intended to wrap up the final legislation to implement the Hayne Royal Commission recommendations this year.
During his address to the Australian Institute of Superannuation Trustees (AIST), Mr Jones said this move was “long overdue”.
Also on Wednesday, Mr Jones announced the commencement of the consultation process on the Your Future, Your Super (YFYS) laws.
In a short statement, Mr Jones said: “The Albanese government will always look for ways to strengthen Australia’s world-class superannuation system. Today, we begin that process.”
The consultation paper seeks feedback on any unintended consequences and implementation issues arising from the YFYS laws which were introduced in 2021.
It follows the outcomes of the second annual performance test for MySuper products, which revealed that a total of five funds failed to meet the objective benchmark in the last financial year.
“The government encourages interested stakeholders to engage with the consultation process,” Mr Jones said.
He confirmed that stakeholder meeting will be held in conducting this review, with Treasury also said to convene a “technical working group” on the performance test.
“The technical working group will be a consultation forum to constructively work through key issues and consider potential solutions,” Mr Jones said.
Labor first voiced its intention to review the YFYS laws during the election campaign and made good on its promise in July with an announcement from Treasury that the review would begin following the release of the second round of MySuper performance tests.
At the time, the government also paused the extension of the performance test beyond MySuper products for 12 months.
During his address to the Australian Institute of Superannuation Trustees, Mr Jones said the Labor government “supports performance measures”. However, it wants to ensure that “when we’re doing that, we’re not introducing mechanisms that have unintended consequences”.
“A lot of issues have been raised about the operation of the benchmarks, we’ve gone through, we’re in the process of going through two measurement periods. I think it’s sensible that we have a look at the operation of those benchmarks,” he explained.
The performance test has been hit by a great deal of criticism, with pundits arguing it could be creating a number of adverse impacts.
Most recently, KPMG conducted research into the challenges that have arisen since the test was introduced last year.
One of the issues pinpointed by the firm was the likelihood that funds that have already undertaken significant mergers or reached ‘mega fund’ status may not be looking to be involved in additional mergers.
Moreover, in a separate research, Frontier Advisors argued that “a number of last year’s ‘failing funds’ produced some of the best returns this year.” This, it said, implies that some of those funds “may not have been bad funds after all”.
“The members that stayed with those funds have done very well this last year.”
The government’s consultation process is open until 14 October.
