Underperforming super funds named and shamed

Five super products have failed the latest MySuper performance testing by the industry regulator, the Australian Prudential Regulation Authority (APRA). For four of those, it’s the second year running they’ve been named and shamed as underperforming super products.

APRA said those four products are all now closed to new members, and the trustees of three of them plan to exit the super industry.

APRA Member Margaret Cole said more than 500,000 members of those three underperforming super products will transfer to new MySuper products before next year’s test.

“APRA will be engaging with these trustees to ensure that members achieve better outcomes as quickly and safely as possible,” she said.

For the other super product listed for the first time, its trustees will have until 28 September 2022 to notify members of the results, and of what action they intend to take.

Which super products failed the APRA test in 2022?

APRA said it assessed 69 MySuper products with at least five years of performance history against its own benchmark that looked at investment performance, fees and costs.

These products represent about 13.7 million member accounts with total assets of about $884 billion.

The product that failed APRA’s benchmark test for the first time was:

• Retirement Wrap – Westpac Group Plan MySuper

The four repeat failed performers were:

• AMG Super – AMG MySuper
• Australian Catholic Superannuation and Retirement Fund – LifetimeOne
• Energy Industries Superannuation Scheme-Pool A – Balanced (MySuper)
• Retirement Wrap – BT Super MySuper

The impact of APRA’s testing on the super industry

This is the second year APRA has carried out the performance test on default MySuper products and last year 13 failed to meet the benchmark. APRA said four had since exited the super business, but five of the underperforming products in 2021 passed this year’s test.

“Pleasingly, almost 96% of MySuper superannuation members are now in a performing MySuper product, equating to 13.1 million member accounts,” Ms Cole said.

“Equally positive is that the performance test has contributed to over 5.1 million MySuper members – just over 38% – now paying lower fees than they were last year.

“This is the culmination of APRA’s intensified supervisory approach, driving trustees to take meaningful action to improve member outcomes. APRA encourages superannuation trustees to continue to explore ways to improve the efficiency of their MySuper products.”

Super Consumers Australia’s director, Xavier O’Halloran, said the second year of APRA testing was another good shake-up for the super industry.

“The fact that some of the underperforming funds are by and large leaving the market is a good thing,” he told Canstar.

“We are really seeing the tail end of the market being cleaned up, leading to better outcomes for consumers.”

Mr O’Halloran said anyone in a super product found to be underperforming should consider moving to another fund.

“People need to weigh up whether their existing fund is right for their ongoing future,” he said.

But he said anyone considering a change should first check what benefits, such as any insurance through super, they might lose if they move to another super product or fund.

Read more: How do I change superannuation funds?

The Association of Superannuation Funds of Australia (ASFA) CEO Dr Martin Fahy told Canstar it was good to see so many super products performing well following the latest APRA testing.

“The Australian superannuation system is recognised as a global leader in driving long-term investment performance outcomes for members,” he said.

“Over the last decade for example, it has delivered 8.1% per annum returns compared to an OECD average of around 6% per annum.”

But Dr Fahey said ASFA still had concerns over the benchmarking methodology, which he said may have “unintended consequences” for the way super savings are invested that may not be in the best interest of their members.

Where can I find APRA’s test results?

There’s no need to wait for a letter to know if your MySuper fund is among the five that failed APRA’s testing in 2022.

You can use the YourSuper comparison tool on the Australian Taxation Office (ATO) website to check which MySuper products are listed as “performing” and those that are labelled “underperforming”.

Read more: How to check if you’re with one of Australia’s worst-performing super funds

Details of the five that failed this year’s APRA test are shown in the table below. Products are sorted in alphabetical order by fund name.
← Mobile/tablet users, scroll sideways to view full table →

Source: ATO YourSuper comparison (accessed 1 September 2022)

Cover image source: Elnur/Shutterstock.com