Super fund performance

On 31 August the Australian Prudential Regulation Authority (APRA) released results from their first MySuper Product Performance Test. The test is part of the Australian Government’s Your Future, Your Super (YFYS) reforms.

These reforms came into effect on 1 July 2021 and are designed to improve the efficiency, transparency and accountability of the superannuation industry.

The results highlighted thirteen MySuper products that failed the test and there were some big names included in the list.

Here, we look at these results and Chris Crough, First Financial Principal, discusses why our clients are protected from this poor super fund performance.

Your Future, Your Super reforms

Your Future, Your Super reforms

The Government’s YFYS reforms focus on tightening the regulatory framework around superannuation. The Treasury states:

“Your Future, Your Super makes the superannuation system better for members in four key ways:

  • Your superannuation follows you, preventing the creation of unintended multiple superannuation accounts.
  • Empowering members, by making it easier for you to choose a well-performing product that meets your needs.
  • Holding funds to account for underperformance, protecting you from poor outcomes and encouraging funds to lower costs and fees to boost Australians’ retirement incomes.
  • Increasing transparency and accountability for how superannuation funds use members’ savings.”
APRA’s performance test

APRA’s performance test

The inaugural APRA performance test assessed MySuper products and looked at two separate sets of data: the average investment returns over the last eight years versus a specific benchmark and the total cost of administration fees for the last financial year versus a benchmark. Products failed the test if they underperformed the benchmark by more than 0.5%.

APRA’s media release says:

“There are 80 MySuper products. APRA has assessed 76 MySuper products with at least 5 years of performance history against the objective benchmark. A total of 13 products failed to meet the objective benchmark.

Trustees of failed products are required to write to members by 27 September 2021 advising them of their Performance Test outcome and providing the details of the ATO’s YourSuper comparison tool.

As well as scrutinising the plans of the 13 funds that failed the test, APRA is engaging with trustees at risk of failing the performance test next year to ensure they take the steps necessary to improve performance, and to understand their contingency plans. These contingency plans must include pre-positioning to be able to give effect to an orderly transfer of members to another fund, if required.”

Worst performing funds

Worst performing funds

We have listed the thirteen worst performing funds below, but Chris highlights that while there are recognisable names within the list, First Financial clients are not exposed to the individual products.

“MySuper is effectively an investment option within a particular fund. You can see that Retirement Wrap BT Super – MySuper is noted in the failed list, but this needn’t alarm our clients. Retirement Wrap is the master fund that covers most of the BT Super products, but the MySuper investment option is not in First Financial’s approved product list.

It can be confusing… especially when you also see Retirement Wrap in the best performing fund list, but it’s all about the particular investment option you have taken.

The MySuper investment option has struggled and failed the test… it shouldn’t be confused with other available investment options that are performing well and that we recommend to our clients.”

Fund
Product
Member accounts
Funds under management ($b)
Status
Type
Retirement Wrap BT Super MySuper 546,432 15.3 Retail Lifecycle
Colonial First State FirstChoice FirstChoice Superannuation Trust 231,401 9.2 Retail Lifecycle
Commonwealth Bank Group Super Accumulate Plus Balanced 54,650 5.6 Corporate Single strategy
Labour Union Co-Operative MySuper Balanced 115,327 4.7 Industry Single strategy
Australian Catholic Superannuation and Retirement Fund LifetimeOne 52,480 4.6 Industry Lifecycle
ASGARD Asgard Employee MySuper 73,607 2.5 Retail Lifecycle
Energy Industries Super Scheme Balanced 11,342 1.3 Public Sector Single strategy
Christian Super My Ethical Super 20,058 0.9 Industry Single strategy
Maritime Super MySuper investment option 8,444 0.8 Industry Single strategy
BOC Gases Superannuation Fund BOC MySuper 2,462 0.4 Corporate Single strategy
AvSuper Fund AvSuper Growth 2,124 0.3 Public Sector Single strategy
Victorian Independent Schools VISSF Balanced Option 3,840 0.3 Industry Single strategy
AMG Super AMG MySuper 15,149 0.2 Retail Single strategy

 

*Chart sourced from Australian Financial Review.

Speak to your financial adviser

We understand this information is complicated… but we are confident in the investment options we recommend. Here at First Financial, we have a dedicated team of professionals that constantly monitors super fund performance to achieve the best possible outcomes for our clients.

It’s important to partner with someone who can keep you informed and on track. To find out how we can help you make the most of your superannuation, please contact our team today.

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