The Association of Superannuation Funds of Australia (ASFA) has released a policy proposal to address underperformance in MySuper products and protect innovation, competition and the strength of Australia’s pooled capital investments.
ASFA believes the Federal Government’s new measure—Holding funds to account for underperformance—represents a significant change to the architecture of Australia’s super system and will lead to unintended consequences.
“We must ensure that measures to address underperformance are well designed and implemented – in particular the definition of what it means to be ‘underperforming’ said ASFA CEO, Martin Fahy.
“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.”
ASFA’s proposed ‘Lifting the Bar’ assessment would achieve the same objective—to target high fees and costs and chronic investment underperformance—without creating the distortion of the need to track to the APRA benchmark.
ASFA proposes that, instead, there should be a one-off ‘Lifting the Bar’ assessment applied to MySuper products and that the annual Member Outcomes Assessment should be utilised to determine whether a product is considered to be underperforming on an ongoing basis.
ASFA’s ‘Lifting the Bar’ assessment of a MySuper product comprises two stages:
Stage 1: fees and costs (representative member basis) would be measured against a benchmark of 130 basis points (one standard deviation from the average MySuper fee). If the fees and costs exceed 130 basis points, the product would be assessed under Stage 2.
Stage 2: net investment returns would be assessed and benchmarked and those in the bottom quartile of risk-adjusted returns that also fail Stage 1 (high fee, low returns) would be ‘prima facie’ underperforming.
A ‘prima facie’ underperforming product would have an opportunity to state its case to APRA as to why its MySuper authorisation should be retained – if unsuccessful the MySuper authorisation would then be revoked.
Access ASFA’s ‘Lifting the Bar’ proposal here.
For further information, please contact:
Jacqui Maddock, 0451 949 300.
ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral, and non-party political, national organisation. ASFA’s mission is to continuously improve the superannuation system, so all Australians can enjoy a comfortable and dignified retirement.