New superannuation fee disclosure rules will make it impossible for consumers to compare super fund fees and costs, says Industry Super Australia.
Industry Super Australia (ISA) says that ASIC’s new Regulatory Guide 97 (RG97) was designed to inject greater transparency into the, “often murky”, fees and costs that are “unwittingly borne by consumers”. However the industry group says the new rules will make it impossible for consumers to compare funds, and give a “leg up” to ‘bank-owned’ and other retail super funds, by not capturing investment platforms – which contain over half a trillion dollars of superannuation assets.
“Inexplicable carve-outs to the new RG97 rules exclude investments via platforms favoured by bank-owned super funds and also can result in direct investments in infrastructure and unlisted property looking more expensive – while actually costing the investor less – than an investment in the exact same infrastructure or property asset through a listed vehicle or platform,” said ISA.
ISA has previously lobbied for exclusions from disclosure requirements for unlisted property and infrastructure investments – investments which are favoured by industry funds.
ISA says the carve outs in RG 97 make it “almost impossible” for consistent and accurate disclosure of fees and costs.
“Thus, not only will this bamboozle consumers it could, if not fixed, change investment strategies of funds resulting in less direct illiquid investments, and ultimately lower returns to members.”
“Consumers should be able to compare super funds on both performance and cost and charges, but the RG97 exemptions will make this impossible,” said ISA Chief Executive David Whiteley.
“Industry super funds strongly support full disclosure by super funds, but disclosure needs to be comparable, in order for consumers to benefit, all super funds must be required to disclose the same fees and costs,” he said.
“The light must be shone on fees and costs across the board, including the shadowy corners of platforms and investment trusts favoured by bank-owned super funds.”
“In its current form, RG97 will create perverse incentives for super funds to change the way they invest, using the carve outs to hide costs,”
“This could negatively impact both member returns and the capacity of Australian super funds to invest in long-term, nation-building infrastructure projects.”
Industry Super Australia is calling on the Government to defer the implementation of RG97 until it can “guarantee full disclosure” by removing the exemptions for platforms and intermediary trusts.