The federal government will review the operation of the annual superannuation performance test in an effort to make it stronger, improve consumer protection and remove barriers to investment, according to Treasurer Jim Chalmers and Financial Services Minister Daniel Mulino.
A joint statement said the move, which will include an industry consultation that is open until 19 June, follows last year’s Economic Reform Roundtable where the government stated it would review the test to ensure it was not creating unnecessary barriers to investment.
“This is all about better aligning and unlocking investment that also boosts productivity, while keeping member interests front and centre,” the pair said.
“Any reforms will not water down the test, which is a crucial part of the superannuation system and here to stay.
“While the performance test has played an important role in improving outcomes for members, aspects of the current design may be discouraging investment in some sectors that could deliver strong, long‑term returns.
“There are also opportunities to modernise and strengthen the performance test, including to ensure the coverage of the test keeps pace with the evolution of the superannuation sector and provides strong protections in light of the collapse of Shield and First Guardian.”
Areas of reform put forward in the consultation paper released by Treasury include adjusting the test for emerging and alternative asset classes, introducing an assessment of risk-adjusted returns, initiating a routine review of the benchmarks and testing externally directed accumulation products.
The announcement was welcomed by the Association of Superannuation Funds of Australia (ASFA), Super Members Council (SMC) and Financial Services Council (FSC) to differing degrees, with calls to step up or back from the proposed changes.
ASFA chief executive Mary Delahunty said the current test measured fund performance against a fixed set of benchmarks, but in doing so made some investments look artificially less attractive in a long-term context like super.
“It’s crucial that in a compulsory system we have a measure of performance. Five years after it was brought in, the performance test has done a great job. It’s now time to modernise it, to deal with some unintended consequences and make it stronger,” Delahunty said.
SMC chief executive Misha Schubert noted around 41 per cent of assets in Australian Prudential Regulation Authority-regulated funds were not covered by the test and called for it to cover all platform products.
“The fact that tens of thousands of Australians have been exposed to products like the collapsed Shield and First Guardian schemes – which weren’t subject to the performance test despite being able to receive compulsory super contributions – shows why closing these gaps is both urgent and essential,” Schubert said.
FSC chief executive Blake Briggs supported improvements to the test, but was cautious about the proposal to expand its coverage to include externally directed products and retirement products, which were more varied and tailored to individual consumer needs.
“Applying an investment performance and fees test to externally directed products, where consumers make decisions with professional advice, and to retirement products, where outcomes depend on individual retirement circumstances and needs, is not comparable to how the test is used for MySuper products,” Briggs said.
Jason Spits
SENIOR JOURNALIST
Jason is a senior journalist with Benchmark Media and writes for the selfmanagedsuper website and magazine and smstrusteenews website. He has covered financial services since 1999 and has written about life insurance, superannuation, investment management and financial advice, in both a freelance and in-house capacity, and also did a brief stint as a media manager for an industry association. He has been the editor of trade titles Money Management and Financial Standard, and was most recently senior journalist with life insurance title Riskinfo.
Articles by Jason