Super funds dragging their feet on after-tax reforms

Superannuation funds have largely ignored the after-tax investing obligations that the Stronger Super reforms embedded into the law, implementation manager Parametric has alleged.

While most funds had invested resources into implementing other reforms, such as MySuper and ‘choice’ product architecture, most still had a pre-tax focus six years after the reforms were announced.

Parametric managing director of research, Raewyn Williams, said that while tax considerations were vital, it was unsurprising that progress to embed them into investment thinking had been slow.

“The industry has undergone massive change in the past six years. Although after-tax investing has been on the ‘to do’ list for funds for a few years, it never makes it to the top of the pile where the urgent and time-critical deliverables sit,” she said.

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“My concern now is that, nearly six years since after-tax investing became a legal responsibility for funds, its rationale will be forgotten.”

Funds could also gain more than legal compliance from implementing after-tax investing options, as they also could improve investment returns.

“The real motivators are that you can be a better fiduciary by aligning your investment thinking to what your members care about – after-tax returns – and an expectation of return pick-ups from an after-tax focus,” Williams said.