Senator Jane Hume has clarified why the government's latest reforms will seek to identify underperforming MySuper products.
Hume was speaking at a Financial Services Council (FSC) event about the Your Super, Your Future package announced as part of the federal budget this week.
FSC chief executive Sally Loane started the event by pointing out that Hume "gave nothing away" about the impending changes to superannuation in her pre-budget media appearance on the ABC, surprising many in the industry.
But, Hume insisted reform was necessary - especially to enhance the performance of default MySuper products.
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"There are over 90 MySuper products, which are supposed to be the most basic that people get defaulted into," Hume said.
"We've decided that the best way for consumers to engage with that system is if they can see all of those funds ranked in order of performance as well as fees."
She said funds will be notified of underperformance at the end of each financial year and will be required to inform members that a MySuper product is underperforming by October of the same year.
"We're talking about underperformance over eight years. It's not about funds having a bad quarter or one bad year," Hume said.
She said MySuper fees have increased since the products were launched, despite competition in the market growing so much. This was concerning to the government, Hume suggested, as the Productivity Commission had found keeping fees in these default products as low as possible was integral to retirement outcomes.
A new, clearer articulation of best interests duty for super trustees was also a surprising reform to come out of the budget. The new duty makes it clear that trustees must act in the best financial interests of members at all times.
Asked whether the new best interests duty will mean an end to ESG investing, Hume replied "no" and said the government does not want to be that specific or stop anyone from doing business.
"There's plenty of research out there that ESG investing is a pretty basic risk filter," Hume said.
"We don't want it to be prescriptive... Trustees already have a higher responsibility; they already have a fiduciary duty. This just frames that duty as acting in the best financial interests of members, not just the best interests of members."
Asked to speculate on the knock-on effect of these latest reforms on not only super but the funds management industry, Hume maintained that her focus was on consumer outcomes.
"The government's responsibility isn't to create a thriving funds management industry," she said.
And, she did not specify whether she thought the Your Super, Your Future reforms were likely to result in far fewer super funds existing.
"We've never compelled consolidation in the industry. We would like the industry to consider it themselves," she said.
Hume said in the future the government would consider the Productivity Commission's recommendation that a review into insurance in super be conducted, and she did not rule out further reform for the sector.
"We will keep reforming superannuation until it's as efficient a system as it can be," Hume said.
"I want to thank the industry for their engagement with me and my team... I've attended a number of board meetings for some of the biggest super funds and have spoken to them candidly."
Hume said the Retirement Income Review is 650 pages long and addresses all aspects of retirement income, not just super. She did not specify when it would be released.