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
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
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
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.”
Funds under management ($b)
|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|
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.
Read more Financial Industry articles.