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Superannuation minister Jane Hume confirmed AMP also lobbied for the change to how administration fees are tested. Photograph: Scott Barbour/Getty Images
Superannuation minister Jane Hume confirmed AMP also lobbied for the change to how administration fees are tested. Photograph: Scott Barbour/Getty Images

Superannuation minister denies AMP lobbying behind benchmark change

This article is more than 2 years old

Jane Hume says change was made to put ‘competitive tensions into the market’

Financial services giant AMP lobbied the federal minister for superannuation, Jane Hume, to water down a benchmark that helped the company pass an important test but Hume denies the lobbying effort was behind the change, according to evidence before Senate estimates.

Hume confirmed during a hearing on Wednesday evening that she met with AMP at some point between April, when regulations were first put forward, and 5 August, when the government reduced the length of time over which administration fees were tested towards the benchmark from eight years to one.

Hume also confirmed that AMP lobbied for the change to how administration fees are tested.

The administration fees form part of a test under which the Australian Prudential Regulation Authority assesses MySuper products, the default super funds into which 14 million Australians direct their retirement savings, against a performance benchmark.

The superannuation minister, Jane Hume. Photograph: Mick Tsikas/AAP

When the test was first proposed as part of the Morrison government’s Your Future, Your Super package, all elements of fund performance were to be tested over eight years because this “allows funds to target long-term returns and not blame ‘one bad year’ for underperformance”.

However, on 5 August, Hume and the treasurer, Josh Frydenberg, reduced the testing time for the administration fee element to one year, a move they said would “create a strong incentive for superannuation funds to reduce fees in order to avoid failing the test”.

The dilution of the test is estimated by Industry Super Australia to have given AMP’s Super Directions fund, which controls more than $17bn in retirement savings on behalf of more than 800,000 members, a substantial increase of 0.2 percentage points because it had recently cut fees.

This helped the fund to pass the test, meaning it did not have to write to members outlining its underperformance.

An AMP spokesperson declined to answer when asked if watering down the fee element was the reason the fund passed the benchmarking test.

“AMP supported the change because we believed super funds should be assessed on the fees that they are presently charging members, which would encourage all funds to keep their fees low,” the spokesperson said.

“The change also acknowledged that there were differences in the historical recording of fee data across funds.”

Under questioning from Labor senator Jess Walsh on Wednesday, Hume denied the change was made because of AMP’s lobbying.

“We did not make it for a particular fund,” she told parliament. “We made it because it put competitive tensions into the market and it meant that superannuation funds felt that if they changed their fees, they could then potentially reach that performance benchmark that would allow them to not have to write to their members to tell them that they have underperformed.”

She said she did not know the AMP fund would be on the list until the day it came out and she was lobbied by a number of other organisations.

“I would also have met with ISA, AustralianSuper, certainly Hostplus, AIST, the FSC. I mean, I could go on, there was so many,” she said.

ISA “originally wanted the administration fees included in the underperformance test”, Hume said.

“It’s the most fractured sector, isn’t it? And everybody wants something slightly different. Of course, the role of government is to make a decision as to what’s the best way forward, not necessarily for the industry, but for the member.”

Thirteen funds controlling $56bn in retirement savings failed the Your Future, Your Super test in results revealed at the end of August.

They included funds run by BT and CBA subsidiary Colonial First State, as well as industry funds LUCRF and Maritime Super.

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