“No matter how lousy they are these dud funds will be able to go on creaming $10 billion in profit each year from members, without having to answer how it is in the members’ best financial interests,” Mr Dean said.

The lobby group’s submission to the government’s consultation period says the proposed should be more widespread.

An example proposed in the submission is for products to be shut down “after one assessment” by the regulator if it underperformed at an extreme level, such as 150 basis points below the benchmark.

Industry Super has also complained the measurement does not take into account administration fees.

“The government should consider introducing more stringent penalties for products that chronically and significantly underperform the proposed benchmarks,” the submission says.

The lobby group raised further concerns about members left in underperforming funds saying it was not clear in the government’s proposal what would be done to help people with poorly performing accounts to switch quickly to better options.

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Future Super chief executive Kirstin Hunter was supportive of initiatives to increase transparency and make performance information public. But she also raised concerns about the effects on smaller funds, like Future Super which has 15,000 members and about $900 million under management, and those with different asset allocations and investment types.

“The way it is implemented will be challenging, particularly for funds like ours that have a different investment spread compared to the benchmark. That will be challenging [to be] compared to an industry-wide benchmark,” she said.

Future Super focuses on fossil fuel-free investment options and was founded in 2014.

Industry Super wants the framework to use longer time frames to make its assessment of performance to “account for risk and market cycles” and sought clarity about how newer superannuation products would be measured.

Industry Super has been at loggerheads with the federal government about which funds will be included in the benchmarking tests. Industry Super says only 70 per cent of retail super funds will not be included in the tests, while Treasury estimates that by mid-2022 90 per cent will be covered.

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