The shadow minister for financial services says reworking the superannuation performance test to allow investment in house and clean energy risks turning super into a ‘slush fund’ for government.
Shadow minister for financial services Pat Conaghan has raised concerns about the government’s plans to review the superannuation performance test, warning that a change in the rules to allow greater investment in green investments and housing could potentially impact long-term returns for members.
Treasurer Jim Chalmers confirmed last week that the government would review the superannuation performance test following the end of the three-day Economic Reform Roundtable.
The review of the performance test would focus on removing unnecessary obstacles or impediments to institutional investors, such as super funds investing in areas like housing.
Conaghan said the push to amend the performance test to accommodate green investments often relied on “unproven models and overly optimistic projections – with no guarantees for members”.
“It’s possible these sectors will offer good long-run returns, but the case isn’t yet proven,” he said.
“It’s taking an unproven gamble with Australians’ retirement savings. That’s exactly why we put the performance test in place. Super should be guided by evidence – not ideology.”
Conaghan said while the Coalition was willing to discuss changes and engage constructively if a formal review proceeds, he stressed that the superannuation must remain focused solely on maximising financial returns for members.
“Australians’ retirement savings should never become a slush fund for pet projects,” he said.
Conaghan noted that independent voices such as Grattan have also raised concerns previously about making changes to the test to meet priorities such as green investment.
In a previous submission to Treasury’s review of the performance test, the Grattan Institute warned that any changes to the test to accommodate ESG investing must not undermine the integrity of the test.
If changes were made to the test, it said regulations would need a robust, game-proof definition of ESG investing.
Investment benchmarks that reflect that definition would also need to be available to assess the performance of ESG funds, said Grattan.
Industry bodies have broadly welcomed the announcement that the government will review the performance test, with both the Financial Services Council (FSC) and Association of Superannuation Funds of Australia (ASFA) stating they would support changes that ensure the test is fit for purpose.
Financial Services Council (FSC) executive director of policy, Chaneg Torres, said there is a strong case to suggest that super funds are currently prevented from investing in certain assets, which over the long term, would deliver good returns for members.
“We would support changes that can be made to the test that enable investment in those long-term assets that deliver returns to members,” he said.
He gave an example of assets that have a high tracking error against the current benchmarks.
“Super funds at the moment are disincentivised from investing in those [types of assets] even if they make sense from a member’s best financial interest perspective as they deliver a good long-term return,” he said.
ASFA CEO Mary Delahunty, who attended the roundtable, said there had been constructive discussion around the performance test with the government and emphasised that any changes would be focused on building good policy rather than deregulation.
