While the government has announced plans to increase governance over the performance of super funds, super members will still need to actively monitor the performance of their fund to avoid being stapled to an underperforming one, says a mid-tier firm.
As part of its Your Future, your Super package, the government revealed plans in the federal budget to staple existing superannuation accounts to a member in order to avoid the creation of a new account when the person changes their employment.
Placing an obligation on super funds to align performance with members’ best interests and ensure their members’ retirement savings are maximised is good news.
All superannuation investment vehicles — whether they are a self-managed superannuation fund, a retail fund or an industry fund — should be on a level playing field when it comes to transparency and governance. Ensuring the needs of members are front and the centre should remain the end game, however, that as with many announcements of this nature in the past, the devil is in the detail.
Developing an appropriate benchmark to measure fund performance against will be key to this proposal, it must balance the need for short-term reporting transparency against the need for funds to invest for their members’ benefit. The metrics used to determine the benchmark itself must also be carefully considered, with a wide range of market, fund and investor factors that should be taken into account.
Despite this increase in government, Australian workers will need to actively monitor the performance of their super fund to avoid being stapled to an underperforming fund.
APRA may eventually take action against an underperforming fund, but many factors influence whether a member should switch funds before that time
Super members may want to have a discussion with their planner or wealth adviser about their personal risk profile and the composition of the fund’s investments and their diversification, liquidity and any other factors that determine retirement goals.
You may wish to speak to us by booking an appointment or by booking a time for a chat at this link.
Miranda Brownlee
22 October 2020
smsfadviser.com
