Govt needs to explain YFYS performance test nuances to members
The Government’s Your Future, Your Super (YFYS) performance test is problematic and the Government needs to properly communicate to Australians what the test actually means for them.
Given the test was part of the Government’s YFYS regime, it can easily be construed by the public that any superannuation fund that received a ‘pass’ mark was given the rubber stamp of approval by the Government.
This is why it is not only on super funds to ensure their engagement is high and communication is clear and information is provided to members of a ‘failed’ fund but also on the Government.
Clearly the goal was to make the test simple enough for members to understand but the reality is that fund performance is much more nuanced than just a ‘pass’ or ‘fail’.
It looks at only one period of time, and does not include lifecycle design, active or passive investments, environmental, social, or governance factors, or insurance.
Not only this, there were some funds that ‘failed’ the test but delivered higher returns than others that ‘passed’ the test.
Without proper communication to members by both the Government and super funds about the nuances, there could be very grave consequences such as members losing a specific type of insurance that is actually in their best interest, or exiting a fund that was providing good returns.
If the Government does not communicate these nuances to the public then they could see themselves walking back on another regime they have established.
Let’s not forget the current government is walking back on its own industry funding model on the advice industry which has seen a 236% increase in the corporate regulator’s levy over the last three years.
While they are “making good” with the levy relief in place and now reviewing the model after three years of implementation and strong objections from the industry, it would be in their interest not to have to do the same with the YFYS performance test.
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