“There are far too many funds, some 6 million multiple accounts, and 3 million fund members languishing in serially underperforming funds… There will always be an element of ‘rough justice’ when measuring fund performance, but that pales in comparison to the ‘rough justice’ frequently meted out to millions of members currently stuck in underperforming funds,” Mr Coates told sister title InvestorDaily.

Australians are currently paying $30 billion in fees every year — around 2 per cent of GDP — while funds enjoyed an uncompetitive environment, with most Australians remaining unengaged with their super and only switching when they changed jobs. 

And while Mr Coates said that there are some “wrinkles” in the government’s plan, with the eight-year window on the “shorter side” for assessing fund performance, alternative proposals — including giving regulators more power — are unlikely to shift the balance of power in favour of members. 

“Alternative proposals that give regulators greater power would replace the clear and transparent process proposed by the Productivity Commission with something much murkier that’s likely to prove unenforceable,” Mr Coates said.

“Every lawyer knows that regulatory action against super funds will end up in court. And courts are always reluctant to allow a regulator to effectively terminate a business, particularly if it is on the basis that it did not meet some inherently vague standard.”

Mr Coates also warned that assessing fund returns net of investment fees but not administration fees “risks funds shifting costs from the former to the latter”.