The Federal Government has been warned that some of the rules it is imposing around the implementation of MySuper are tantamount to the Government interfering in and over-riding valid financial decisions made by superannuation fund members.
The warning has come from the Association of Superannuation Funds of Australia (ASFA) in a submission to the Parliamentary Joint Committee on Corporations and Financial Services review of the Government's Stronger Super legislation.
That submission specifically points to the legislation's definition of "accrued default amount" and references the "considerable concern" expressed by ASFA members that the definition includes amounts where the member has given the trustee instructions as to where to invest their account balance and some, or possibly all, of their account balance is invested in the "default" option.
It said that under the MySuper approach, unless the member then "opts out", any "accrued default amounts" will need to be moved into a MySuper product, whilst amounts in other investment options will need to remain in or be placed into a choice product.
"We query why – in circumstances where a direction as to the investment option has been given – an amount is to be treated as an 'accrued default amount'," the submission said.
"This amounts to the Government interfering with, and effectively overriding, valid financial decisions made by the member".
As well, the ASFA submission said the rationale for the approach, as outlined in the explanatory text – that the member has "explicitly chosen to delegate responsibility for investment decisions to the trustee" – "reveals a fundamental misunderstanding of the principles underpinning member investment choice (other than member-directed products)".
"When a member exercises investment choice they are choosing between various investment options, in respect of ALL of which the trustee is ultimately responsible, and the member is delegating responsibility to the trustee with respect to ALL of those investment options," the submission said.
"There is nothing inherently special about the "default" investment option per se other than – as the name implies – it is the one into which members who have not made a choice have their contributions 'defaulted'."
