While the local body welcomes the legislation, it has raised some “concerning” issues with the current reforms, particularly the test that deals with superannuation funds that “underperform”.
In a submission to the Treasury, lodged last week, the institute said the test “may, in some cases, be to the substantial long-term detriment of members”.
“Asset allocation is the largest driver of total net returns, yet is disregarded by the test,” convenor of the Actuaries Institute’s superannuation practice xommittee, Tim Jenkins, said.
“The proposed test narrowly focuses on how a trustee has implemented an investment option’s disclosed asset allocation, not on member outcomes.
“As a result, the proposed performance test leads to some concerning results, including an investment option with top quartile net returns potentially failing the test. Or two investment options having the same overall risk profile and identical net returns after fees yet one passes the test, and the other fails.”
In its submission to Treasury, the institute recommend a number of changes to the legislation including the performance test be deferred or, if it cannot be, apply transitional arrangements to protect member outcomes.
The recommendations follow after Super Consumers Australia released their own recommendations for the bill, which they called “highly problematic” in its current state.
Neil Griffiths
Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.
Neil is also the host of the ifa show podcast.
