Key Govt supporters reject faith-based performance test exclusions

Mike Taylor

Managing Editor/Publisher, Financial Newswire

13 September 2022

Key sectors of the superannuation industry have come out strongly against the Government’s proposals to treat so-called “faith-based products” differently under the superannuation performance test.

Both Super Consumers Australia (SCA) and Industry Super Australia (ISA) have come out against the proposals announced by the Assistant Treasurer and Minister for Financial Services, Stephen Jones, with ISA saying such a move potentially undermines the intention of the performance test.

Submissions to the Treasury responding to the Government’s proposals have been made public and suggest concerns about the move.

“The Government’s proposal to provide differential treatment to faith-based products – by giving these products two attempts to pass the performance test – potentially undermines the intention of the test,” the ISA submission said.

“In particular, it creates an uneven playing field between faith-based products and other superannuation products, including products that also apply values-based investment principles (such as those that are marketed as being ethical or socially responsible).”

“The proposed process for applying for a faith-based exemption also appears to lack sufficient transparency and could be improved by ensuring APRA is required to publish the alternative index or indices used to assess the performance of the relevant faith-based products.”

“To the extent unintended and perverse outcomes arise as a result of applying the current performance test benchmarks to faith-based products, the same issue is likely to exist for other products, including those that apply values-based investment principles,” the ISA submission said.

For its part, Super Consumers Australia warned that the proposed approach warned that it might see a product underperform the universal benchmark for years without scrutiny.

It said that without any repercussions “there will be no substantial incentive for faith-based products to improve”.

“As a result people will be left to languish in underperforming funds and are likely to experience materially poorer retirements,” it said.