Treasury Consultation: Your Future, Your Super Review
Earlier today Treasury issued a consultation paper seeking feedback on any unintended consequences and implementation issues that have arisen from application of the Your Future, Your Super (YFYS) reforms.
Treasury’s paper summarizes the four key elements of the YFYS framework, offers a brief assessment of how each element has progressed, and highlights a number of issues and questions for feedback.
Treasury ask a number of questions in relation to the test methodology, the consequences of failure, and product coverage. In particular, Treasury ask if the current design of the test affects risk-taking behaviour by trustees, and whether it distorts investment decisions or reduces choice for members.
In addition, Treasury want to know if the notification of test failure to members has been effective at encouraging members to switch to alternative products, and what significant issues may be raised by extending the test to Trustee Directed Products and other Choice products.
YourSuper comparison tool
The paper asks if the tool is having the intended effect of empowering members and encouraging competition. Is the tool effective at informing new employees of their options? To what extent would altered or additional metrics make the tool more effective while ensuring it remains accessible to members?
Treasury cites anecdotal evidence that some employers are encouraging new employees to choose a fund (including the default fund) to avoid having to obtain stapled fund details from the ATO. The paper asks to what extent are employers fulfilling the stapling requirements intended by the YFYS reforms. It also asks what is the actual or likely impact of stapling on insurance coverage.
Best Financial Interests Duty (BFID)
While noting that trustees with sound governance and oversight arrangements already document how their actions are consistent with the BFID, Treasury report that some trustees lack clarity in relation to recording compliance. Treasury ask if there are certain types of expenditure or activity that trustees are concerned about being able to prove compliance, and whether there should be a materiality threshold. In addition, the paper asks if the reverse onus of proof is the most appropriate way to achieve the objective of improving member outcomes.
The closing date for submissions is 14 October 2022. AIST will be making a submission. We will provide further details of how we intend to consult with members in due course.