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Members should not be stapled to dud funds: AIST
New Australian Prudential Regulation Authority (APRA) data shows widespread underperformance of Choice superannuation products, highlighting the need to stop members being stapled to a dud fund, says the Australian Institute of Superannuation Trustees (AIST).
AIST chief executive, Eva Scheerlinck, said the release of APRA’s ‘Information paper on the performance of the Choice sector’ confirmed underperformance was a serious problem in the sector.
The APRA analysis showed administration fees of Choice products were 40% higher, on average, than MySuper and Choice products and twice as likely to be an underperforming product.
“While Choice products are defined as products that members have actively chosen to join, we know that many people are ‘sold’ into them and remain in the dark about how their super is performing,” Scheerlinck said.
Scheerlinck reiterated AIST’s call for all APRA-regulated super products to be performance tested and for the Government to amend legislation to prevent any member being stapled to an untested or persistently underperforming super product.
Under new rules, which come into effect from 1 November, 2021, new employees who do not actively choose a different super fund when they change jobs would see their super paid into their existing account (stapled fund) rather than their employer’s default fund.
AIST said this was a good outcome for Australians already in high performing funds but members of dud funds could be significantly worse off than otherwise.
Scheerlinck said: “It is now more important than ever that Australians should be protected from being stapled to an untested or persistently underperforming product. While some Choice products will be tested next year, it will be too late for millions of Australians who will be stapled to underperforming options from 1 November”.
“Even if Choice members want to compare performance there is no easy way for them to do this as the ATO Your Super Comparison Tool only covers MySuper products.”
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