Amber light for ratings
Super funds body slams coding system
THE nation’s new superannuation ratings system that classifies funds into red, amber and green based on their cost and performance has been slammed by the nation’s top superannuation body.
The Association of Superannuation Funds of Australia’s chief executive officer, Martin Fahy, said it was “irresponsible” to rate funds in the new traffic light colour-coded system.
Funds’ MySuper products – default super products – will be classified on the basis of four criteria.
Green will be the best, while red the worst.
The banking regulator, the Australian Prudential Regulation Authority, will publish the ratings of 100 or more MySuper products after analysing their risks, fees, insurance and fund sustainability net growth.
The results are due to be published later this year.
But Dr Fahy said the new ratings system was fraught with danger.
“Putting a heat map (of ratings) out into the public domain is irresponsible,” he said at the JANA conference in Melbourne yesterday. “Are all including the funds that are green endorsed by the regulator? And what’s the implication for the fund that’s red?”
The coloured system has been introduced in a bid to shame underperforming funds and will make it easier for members to determine if their fund is doing well or not.
“The idea that we can reduce funds to good and bad, Association of Superannuation Funds of Australia CEO Martin Fahy says colour-coding funds is irresponsible red and green in a binary manner is improvised – it sells us all short,” Dr Fahy said.
“The challenge here is to be able to signal and remove underperforming funds.
“What we do know is habitual underperformance does come through pretty clearly.”
Dr Fahy conceded while some funds had unperformed, “the system’s not broken”.
He said there was too much tinkering to superannuation in Australia and it needed to stop.
Speaking in Sydney yesterday, APRA chairman Wayne Byres said the criteria to classify funds would expand to include insurance at a later date.
“Our goal here is pretty simple: to identify those trustees that, when looked at across a range of dimensions, do not seem to be delivering value-for-money outcomes,” he said.