Controversial tests weeding out underperforming superannuation funds will be revamped following concerns they could put off the $3 trillion sector from investing in long-term projects like infrastructure.
The federal government is releasing draft regulations for four weeks of consultation, which will tell super funds how they have to disclose investment portfolio details to members, provide a new methodology for annual performance tests they must meet and how to notify members if they fall short.
The Your Future, Your Super reforms were introduced during last year’s federal budget and are scheduled to start in July. The federal government says the changes will save workers $17.9 billion over 10 years by reducing the number of duplicate accounts, cracking down on underperformance and giving the federal government more power to intervene on spending decisions.
Treasurer Josh Frydenberg and Superannuation, Financial Services and Digital Economy Minister Jane Hume have now changed the benchmarking tests set to be imposed on super funds to include specific asset classes for infrastructure and unlisted property.
“The government has made several amendments to strengthen the performance test,” Mr Frydenberg and Senator Hume said in a joint statement. Funds that fall short will be forced to tell members and could be blocked from adding new members if they continue to underperform.
Concerns were raised by Labor, superannuation funds and some regional MPs that the original benchmarks could risk making investments in regional projects and major nation-building infrastructure investments less attractive to funds concerned about falling behind the pack over the short term.
In early April, Labor’s superannuation spokesman Stephen Jones sent letters to more than 90 Coalition MPs warning the changes were an “overreach” and raising concerns the reforms would be “very bad for regional investments”. IFM Investors chief executive David Neal last year said the benchmarks could lead to fewer infrastructure projects during the nation’s economic recovery from the coronavirus pandemic as there was a risk returns from these investments would be worse than a listed market index in some years.
In the initial version of the reforms, the performance tests also did not take into account administration fees instead focusing on investment returns and associated costs. These admin fees will now be included.