Jim Chalmers eyes shift in super fund test

Jim Chalmers wants to loosen performance tests for funds who invest in nation building projects such as housing and clean energy.

Jim Chalmers insisted that the government’s drive to get super funds to invest more in nation-building projects, such as renewable energy, would not contravene rules requiring that super funds manage money in members’ best interests. Picture: NCA NewsWire / Martin Ollman

Jim Chalmers says he wants to loosen legislated performance tests for superannuation funds that invest in nation-building projects such as housing and clean energy.

Following a meeting with big investors, including some of the nation’s biggest banks, superannuation funds, venture capital firms and asset managers, the Treasurer announced he would “consult on options to improve the superannuation performance test so that trustees are held to account for member outcomes without holding back investment in economic priorities such as the net-zero transformation and housing”.

During a break in the meeting on Tuesday Dr Chalmers said “the performance test has played an important and welcome role in superannuation – that’s acknowledged on all sides”.

“We need to make sure that that is designed in a way that it’s intended to, and in a way that doesn’t deter investment in important areas. And so all we’ve agreed today is that we would do some more work on that, some more consultation and collaboration on that,” he said.

The performance test assesses the performance of default MySuper products and trustee-directed funds over eight years against a relevant benchmark.

While an overwhelming majority of funds have passed the tests, the most recent assessment conducted by the Australian Prudential Regulation Authority in August found roughly 64,000 accounts, with almost $4.2bn in assets, were in underperforming funds.

Funds that fail the test for two consecutive years are banned from taking on new members.

The test was legislated in 2021 as part of the Coalition’s Your Future, Your Super reforms.

The Albanese government earlier this year fought a losing battle against rules compelling super funds to disclose detailed information on how much members’ money they were spending on marketing and donations to unions.

Dr Chalmers said “the test has helped lift the investment performance of superannuation funds by encouraging continual improvement or exit of underperforming funds”.

“However, there are concerns that the current test may be influencing investment decisions to the detriment of member outcomes, including discouraging investment in asset classes that can strengthen the economy, such as in housing and the net-zero transformation, even where it would be in the best financial interests of members,” he said.

The Treasurer insisted the government’s drive to get super funds to invest more in nation-building projects that align with Labor’s priorities would not contravene rules requiring that super funds manage money in members’ best interests.

“We think it’s fundamental to superannuation that the first priority is to deliver great returns for fund members. We have not at any point suggested interfering with the primary responsibility of a super fund to their members … but we believe it’s possible to find win-wins here.”