Changes to the government’s proposed Your Future, Your Super (YFYS) legislation may allow super funds to hide part of their annual fees, disguising the true cost to members and hurting returns.
The YFYS laws were a surprise inclusion in last year’s Federal Budget and introduce a raft of changes the government says are necessary, including one to stop super funds overcharging members for a range of fees.
A ‘performance test’ initially counted only investment fees but not administration fees, which can be a significant. In the face of fierce criticism, the federal government added a requirement for eight years of administration fee records to be shown. However, there has been another last-minute change – one that is not in members’ interests, critics say.
Instead of the proposed eight years of admin fees being provided, funds will now be required to list only last year’s fees.
Read: Treasury claims that Australians aren’t spending their super rubbished
Industry Super Australia (ISA) says this will allow dodgy funds to hide years of high fees and accuses the government of siding with business interests over consumers.
“The initial YFYS package excluded administration fees from the performance test, which are huge profit generators for retail funds and now, on the eve of the performance test assessment, it has weakened the test in favour of the for-profit sector,” ISA says in a statement.
“This not only allows dud super funds to whitewash years of fee gouging, it also gives unscrupulous players free reign to fiddle the books and shift costs to the investment side with little impact on its performance assessment.
“Through creative bookkeeping, funds could still be charging members the same high fees but sneak through the test. Members would then never be told their fund is an inferior performer.”
Read: New fund tops superannuation satisfaction rankings
The federal government disputes the accusations and says the performance test will improve super balances for millions of fund members. In a statement, it says the move will save Australians $17.9 billion over 10 years.
“The final performance test addresses historical anomalies, including with respect to millions of multiple unintended and inactive accounts, and will create a strong incentive for superannuation funds to reduce fees in order to avoid failing the test,” Senator Jane Hume, federal minister for superannuation, financial services and the digital economy, told TND.
“In doing so, this change will enable the reforms to deliver immediate benefits to consumers in the form of lower fees.”
But industry figures remain unconvinced, with some predicting it will be the consumer rather than the retailer who eventually loses out under the latest changes.
Read: Super splitting and how to maximise your tax-free entitlements
“Millions of Australian workers unknowingly stuck in a dud super fund will be the biggest losers from the government’s sneaky backflip on performance tests that were meant to clean them out of the system,” says ISA chief executive Bernie Dean.
“Some funds could cook their books to sneak through performance test assessments, resulting in millions of Australians being unaware their super fund is ripping them off and could get a better deal elsewhere.
“The government needs to reverse its backflip and protect working Australians, not dodgy financial services companies.”
Have you checked your super funds fees lately? Any nasty surprises? Let us know in the comments section below.
If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.