THE intention of the Your Future, Your Super draft legislation is to get rid of the millions of multiple superannuation accounts for employees who do not choose a superannuation fund when they start a new job.
However, in its current form Your Future Your Super does not address the existing stock of multiple super accounts. Effectively, everyone with more than one super account is grandfathered by the draft legislation. A lot of people are not even aware they have multiple accounts. Your Future Your Super does nothing for those people, three million of them with combined balances of $100 billion.
The intention of the Your Future, Your Super draft legislation is also to get employees into high-performance funds. To this end, the law proposes annual performance tests for super funds. If a super fund fails this performance test two years running, the fund can’t accept new members and will be forced to close eventually.
Evidence was given to a Senate inquiry that telling a good super fund from a bad one using the test proposed by Your Future Your Super is unlikely to be effective. So, you might not have multiple super accounts anymore, but the single fund you are a member of might be a badly performing fund with a ‘pass’ test score.
Also, the performance test may lead super funds to adopt super-cautious investment risk strategies. They would pass the test, but they would be making less money for their members.
The Government has said it is fixing one problem with the Your Future Your Super draft legislation. Administration fees charged by super funds will be included in the performance test, so that members know exactly what it costs funds to get the investment return which funds like to brag about.
The intention of the Your Future Your Super draft legislation would also require super funds to work in the best financial interests of the members. Many funds have scoffed at this because there is already a ‘best interest’ test. So, maybe a ‘best financial interest’ test is not only unnecessary but may actually mean other legitimate interests are ignored, for example, campaigns to reduce gender inequality, implement strategies towards environmental sustainability and strategies to increase financial literacy among fund members.
Controversially, the Your Future, Your Super draft legislation would allow the Government to prohibit certain payments, such as political donations, or investments.
Finally, a lot of the detail for all of the above is still missing. Regulations, which spell out the detail not included in primary legislation, have yet to be drafted.
It’s not surprising therefore that, although the Government and the Opposition agree on the need for legislation and the broad measures, the future of Your Future Your Super in its current form looks a bit bleak.