The government’s Your Future, Your Super reforms will see Australians “stapled” to a single superannuation account in order to prevent the payment of fees from duplicate accounts – but the AIST believes the industry needs to be cleaned up first.
“Regulators need to deal with underperformance before any stapling begins,” said AIST CEO Eva Scheerlinck.
“We are concerned that millions of members could be stapled to an underperforming fund with the scheme relying on disclosure to get people to switch to a better fund.”
The reforms will also introduce an obligation for underperforming funds to inform members of their shortcomings and potentially bar them from taking on new members if they don’t lift their game – but Ms Scheerlinck cited research that indicates mandated disclosure has been ineffective in influencing consumer behaviour and instead puts responsibility on consumers (rather than regulators) to deal with underperformance.
“In a compulsory super system, good disclosure is essential, and this includes providing simple, accessible tools for consumers to make informed decisions about their super,” Ms Scheerlinck said.
“…naming and shaming won’t go anywhere near to fixing systemic underperformance in our super system, which is a job for the regulators. So there is a real danger when you are stapling people to a product and relying only on disclosure alone to protect their interests.”
Ms Scheerlinck also noted that disclosure had worked poorly in the electricity market, and was also concerned that the reforms didn’t adequately address differences between super funds, noting that some funds are tailored to “high-risk workplaces” and stapling might leave some members inadequately insured if they changed industries.
Industry Super Australia (ISA) has also said that the Your Future, Your Super reforms need “re-calibration and strengthening” to fully realise benefits to members.
“While it is pleasing the government is tackling multiple accounts, stapling workers to a single fund could leave them stuck in a dud fund for life, costing them hundreds of thousands of dollars at retirement,” said ISA chief executive Bernie Dean.
“Stapling the money to a member would remove multiple accounts quicker and more effectively weed out underperformers. Underperformance is the biggest cost drain on member savings and dud funds need to be removed no matter what type of fund they are.”
