The Government’s superannuation performance test proposal needs to define ‘underperformance’ or it could have unintended consequences and undermine the super system, the Association of Superannuation Funds of Australia (ASFA) believes.
ASFA said the Government needed to make sure the test was well designed and implemented.
ASFA chief executive, Dr Martin Fahy, said: “Australia does not suffer from a shortage of good funds – it is imperative that any measures that are designed to address underperformance do not reduce competition, distort investment decisions or damage the nation building role of superannuation”.
The association has proposed a ‘Lifting the Bar’ assessment to target high fees and costs and chronic investment underperformance, without creating the distortion of the need to track the Australian Prudential Regulation Authority (APRA) benchmark.
It said the assessment should be a one-off that applied to MySuper products and that the annual member outcomes assessment should be utilised to determine whether a product was considered to be underperforming on an ongoing basis.
Its proposed assessment comprised of two stages:
ASFA noted that a ‘prima facie’ underperforming product would have an opportunity to state its case to APRA on why its MySuper authorisation should be retained and if unsuccessful its authorisation would be revoked.
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