EDITORIAL

'Rough justice’: Will this be our standard?

‘Rough justice’ is a term being used by some in support of the Your Future, Your Super performance test.

In a nutshell the line of thinking seems to run as follows: if the status quo is viewed as poor (in this case, an expensive industry with lots of agency issues), the policy intent is good (protect consumers from underperforming funds) and the expected outcome appears reasonable (industry consolidation via the removal of underperforming funds), then the policy justifies a few funds inadvertently being treated unfairly.

In this context ‘rough justice’ sounds reasonable and readily fits the populist, slogan-driven environment in which we find ourselves. But this isn’t the standard we want to set.

Let’s backtrack: there is no long-term stated vision for Australia’s superannuation system. We think a system that is efficient, engaging, and producing good retirement solutions sounds reasonable. A clear vision motivates a range of policies and regulations which would need to be developed in a cohesive and integrated manner.

Instead, we see the continuation of a bipartisan trend: no stated end vision for superannuation but an uncoordinated piecemeal collection of individual policy and regulatory initiatives.

Unfortunately, in this case consumers will also experience rough justice. Eventually all funds will find themselves constrained by the test, regardless of how much banked performance they have. Constraints can only impede performance, and we expect that all members of MySuper funds will be adversely impacted over time. Sadly, it is likely be the disengaged and vulnerable that are most impacted as they get stranded in subpar ‘zombie funds’. Rough justice does not appropriately describe the impact on consumers – collateral damage is a more apt label of their experience.

Be wary of the standards a rough justice mindset brings to future policy design and assessment. It dilutes accountability and the drive for excellence. At its worst rough justice becomes a rubber stamp for poor policy.

It is undeniable that fund performance is a difficult, complex and subjective area. We know it is easier to shoot holes at other people’s ideas than it is to devise a better solution. But in this case the holes are many, and there really are better solutions. Lots of feedback, some independent, research-based and made open source, has been shared with Treasury. Policymakers cannot deny they were not made aware of many of the likely consequences.

We are not pardoning away the agency issues of the industry. But we watch with concern that consumers may end up being the collateral damage of a rough justice policy.

Colin Tate, founding chair, The Conexus Institute