Strong 2017 returns are no reason to be sanguine according to Australian Institute of Superannuation Trustees chief executive, Eva Scheerlinck.
2017 has delivered some excellent returns for super fund members but the industry is certainly not resting on its laurels.
Many leading profit-to-member funds are now in their eighth consecutive year of positive returns since the global financial crisis, with industry funds dominating the performance tables for the past decade.
Against a backdrop of global political uncertainty and low inflation, the double-digit returns achieved by many funds this year were largely unexpected. The Australian Institute of Superannuation Trustees’(AIST) survey of delegates to our annual investment conference back in 2016, revealed that 70 per cent feared their fund would underperform against its own investment objective.
So it was a very pleasing outcome for super fund members that these fears proved unfounded.
Away from the media buzz about investment returns, the year was a very demanding one for the funds, notably on the policy and regulatory front.
A key focus of the first half of the year was implementing new processes to deal with the raft of policy changes – announced into the 2016 May Federal Budget – but which became effective on 1 July, this year.
Amid all the confusion and uncertainty that accompanies any super tax change, funds worked overtime to explain the new rules to their members, if only to clarify that most of their members would be unaffected. This included communicating the changes relating to the
Transition to Retirement (TTR) accounts, which did have a negative impact on some older members. Advice teams also faced the challenge of communicating the new Age Pension eligibility rules to older members. These rules, which affected far more people than the Budget changes, took many retirees by surprise.
Then there was the challenge of fighting policy proposals that AIST and our member funds believed were not in consumers’ best interests. This included the Government’s contentious Bill to force change to the composition of the boards of profit-to-member funds and its move to introduce a members’ outcome test that devalues the importance of net returns.
The profit-to-member sector also engaged heavily with the Australian Tax Office (ATO) about our concerns with the proposed online ‘choice’ form for new employees. Similarly, there were many meetings to iron out implementation issues with the ongoing roll out of SuperStream – including challenges around new ATO reporting obligations for funds. These issues will continue to be a priority for AIST next year as will consultations with the ATO on Single Touch Payroll. The latter is set to become compulsory for large employers from June.
Seemingly endless consultations about Australian Securities and Investments Commission’s (ASIC) contentious fee and cost disclosure requirements also dominated the policy landscape.
After a four-year consultation process that had left many industry participants fatigued, ASIC announced an independent review in October and an extension to its facilitative compliance approach to the requirements, which had come into effect a month before. The collective sigh of relief across the industry was almost audible. AIST had long questioned the disclosure regime’s ability to meet its stated objectives of increased transparency and true comparability of fees so an opportunity to reconsider the value of the project and what it delivers for members is appropriate.
Similarly, consultation on the development of a super industry insurance code has been a long and arduous process. At the time of writing, the super industry working group was still negotiating on some of the code requirements.
Such has been the pace of regulatory change across our industry that a key objective of AIST for 2018 will be to develop a framework for designing effective processes for consulting on proposed changes to the regulation of the super industry. For some time now, AIST has been concerned about regulatory overlap. A framework for assessing, stress testing and designing new regulation is needed to ensure members of super funds are not paying for something they don’t need nor understand. This framework will recognize that regulatory change needs to be subjected to a robust cost-benefit analysis and that any change must not be overly complex. Ultimately, there must be an obvious benefit for super fund members.
Another important issue that AIST plans to elevate next year is our work on promoting universal superannuation coverage. Whether it be Indigenous groups missing out, insecure workers in the gig economy or women working part-time, the gaps in our super system appear to be widening.
We will be pushing to fast track the move to 12 per cent, focusing also on unpaid super, and other things that cause the gap. We need to ensure that double digit returns make a difference – to everyone.
Eva Scheerlinck is chief executive officer at the Australian Institute of Superannuation Trustees
