The Association of Superannuation Funds of Australia (ASFA) has called the treatment of accrued default amounts under Australian Prudential Regulation Authority (APRA) draft prudential practice guide SPG 410 as akin to the Government interfering and overriding valid financial decisions made by super fund members.
ASFA said the current definition of 'accrued default amount' did not recognise the directions given to trustees of previous funds in the case of a successor fund transfer, and included members that chose the default option and gave direction to investment choice.
ASFA said the paradigm within which MySuper had been constructed – with its focus on the underlying investment options and the member – was flawed, as the focus on 'choice' and MySuper money meant a member could fluctuate between the two by virtue of daily switching.
"The current interpretation effectively denies choices that members have made with respect to their fund and/or their investment options/strategies," ASFA stated.
MySuper should have been created as a notional category or division of membership, where the person either does not participate in investment choice and is placed in the MySuper category, or does participate and is placed into the 'choice' category.
It would also allow funds to re-badge investment options, retaining the same insurance and fees across the categories.
"Accordingly, we suggest that members who have chosen to have an amount invested in a default option should be treated as a choice member and not have any amounts moved into MySuper," ASFA said.
It said the charging of administration fees for members who had split their retirement savings between choice and MySuper options was unclear, as was the application of accrued default amounts to funds with lifecycle options and multiple default options.
