The $59 billion industry fund is calling on the government to include all superannuation products in the proposed performance benchmarks from the same date and to not commence the rest of the measures until all underperforming funds have been removed from the system.
Speaking at the Senate Standing Committee on Economics Inquiry into the Treasury Laws Amendment (Your Future, Your Super) Bill 2021, Cbus chief executive Justin Arter is concerned that choice funds have the most underperformance and is pushing for them to be included in the benchmarking.
"Funds that would not be captured by this are known as choice products and unfortunately that is an area in which you see the some of the greatest level of underperformance, both in terms of what those products afford the owners of them and the highest fees," Arter said.
"We think that the net, if it is being thrown, it needs to be thrown across the entire sector for the good of all superannuants in the country."
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Cbus executive for brand, advocacy, engagement and product Robbie Campo added that the Productivity Commission identified choice products as the worst performing in the sector and therefore stapling a member to a fund could have significant consequences.
"Our concern in the meantime is people being stapled to underperforming products and, as Justin noted, it is really critical that the underperformers are captured from the outset," Campo said.
In its submission, Cbus recommended that the commencement date of the performance benchmarking should be pushed back a year to 1 July 2022 and weed out the underperforming funds prior to implementing the rest of the measures.
Arter explained that a Cbus member who had been in its MySuper product for the last 20 years, making the normal 9.5% super contributions would have a balance today of $377,000.
"For a fund that was 1% less in performance that person would have 16.3% less and if they were in the bottom fund for that category, they would have 62% less in their balance," he said.
"This law of compounding interest works very powerfully against you if you are in an underperforming fund."
Arter noted that Cbus supports the objectives of the legislation but disapproves of the passage of the bill without amendments.
When asked whether the stapling measures are salvageable or should be rejected, Campo echoed Arter and pushed for amendments.
Campo agreed: "Our view across the board is the bill has very significant issues in terms of negative impact without significant amendment to the stapling measures and other measures - it needs such amendment that it should not be passed as it stands," she said.
The Senate inquiry report on the legislation is due by 22 April 2021 and the proposed measures are intended to apply from 1 July 2021.