APRA has released the results of its inaugural performance test, revealing that a total of 13 funds failed to meet the objective benchmark.
As part of the Your Future, Your Super reforms, the government has mandated a performance test to ensure members are aware of how their fund measures up on key performance metrics.
APRA’s inaugural results showed 76 MySuper products have been assessed, with at least five years of performance history against the objective benchmark. A total of 13 products failed to meet this benchmark.
Among the 13 funds deemed failures are AMG Super, ASGARD Independence Plan Division Two, Australian Catholic Superannuation and Retirement Fund, AvSuper, BOC Gases Superannuation Fund, Christian Super, Colonial First State FirstChoice Superannuation Trust, Commonwealth Bank Group Super, Energy Industries Superannuation Scheme-Pool A, Labour Union Co-Operative Retirement Fund, Maritime Super, Retirement Wrap, and The Victorian Independent Schools Superannuation Fund.
These funds will now be required to write to their members by 27 September 2021, advising them of their poor performance.
“It is welcome news that more than 84 per cent of products passed the performance test, however APRA remains concerned about those members in products that failed,” APRA executive board member Margaret Cole said.
As well as scrutinising the plans of the 13 funds that failed the test, APRA noted they are 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.
“APRA has intensified its supervision of trustees with products that failed the test and has requested they provide a report identifying the causes of their underperformance and how they plan to address them,” Ms Cole said.
In a separate statement, Treasurer Josh Frydenberg revealed that $56.2 billion is invested in underperforming products, with these products holding almost 1.1 million accounts.
“Importantly, eight products have exited the market since the performance test was announced by the government, demonstrating that the positive impact of the test extends beyond singling out underperforming funds,” said Mr Frydenberg.
The Your Future, Your Super reforms are estimated to save Australian workers $17.9 billion over 10 years. Through these measures, the Morrison government is hoping to ensure the superannuation system works harder for all Australians by increasing transparency and accountability of returns generated for members.
From next year, the annual performance test will also be expanded to a wider range of superannuation products, providing more members with the assurance that their product is being held to the highest standards of accountability.
It would be interesting to see how much the CEO’s of these failed funds get paid. A motza ill bet.
Its interesting to note that Maritime super use hostplus investment options, maybe they clipped the ticket a little hard on the investments?
Nice try. They have been using them since April 2021.
Wow the performance must have really been bad before that then.
Correct me if I’m wrong, but these are not the 13 worst funds. They are the 13 worst performing Mysuper products. Completely. Different. Thing.
I will beleive these results better once it is mandated that NO super fund is allowed to have any reserves in it for smoothing out profits. As a member if I make the money I want the money. I dont want it hived off for the trustees to allocate it out to income in another year to boost the proift when I may no longer be a member of that fund. This is just a silly when you have funds full of reserves for trustees to use to smooth out the funds profits from year to year.
The other advantage of no reserves, the expenses for running the fund and the percetnages of revenue will be more obvious and higher without the smoothing effect of the reserves.
So a win all around for the members, as they will be able to truly see how their fund is actually perfomring for a change.
A few observations on how this will play out over the next 20 years (assuming it stays around that long):
1. All funds will push the envelope with regard to asset/risk profiles. All balanced funds will have a max of 5% cash and the rest in “alternative income”. If there is a significant downturn God help those close to retirement who have just gone into the default investment option.
2. Every two years the bottom 15% of Mysuper options will get the chop. In 20 years there will only be a handful left.
3. As there is only a handful of funds left, the Government will roll them into one and rebrand it the Future Fund Mk2. The bureaucrats can finally get their hands on the taxpayers savings.
Asgard AESA is closing by 18 October. Christian Super has problems, & few people will switch funds because no one reads their superannuation mail anyhow. Labor will consign this legislation to the scrap heap when they win office (in a landslide) next May. 46 – 54 2PP now !!!
Never going to happen.
Performance should be measured over 10 years plus. Hopefully common sense will prevail.
I’ve been waiting for the train named Common Sense to pull up at the station for decades, now….
[quote=Frank G]How is this assessment of fund performance relative for clients to determine the most appropriate fund for their retirement savings? Do they expect every member to jump ship to the best performing fund every twelve months?
Total waste of resources in my opinion.[/quote]
Yes and we will be expected to give them a 60 page soa every year to jump ship chasing the return from last yr , i thought be were supposed to help to educate clients on understanding risk and volatility, no doubt all the funds compared have precisely the same asset mix 265 days of the yr.
That’s a silly comment….don’t you know industry funds don’t have to do SOA’s.
Interesting to note that when I scrolled down the page I read that Maritime Super is leaving the ISA network. Very telling timing. Could it be they determined that the money flowing out to ISA has been contributing to their poor performance, but not delivering benefits to members?
Michelle: “Hey Bob,,,,how much money do you have in Australian Shares.”
Bob: “We’ve got 22.5% in Australian shares using a cheap index fund”
Michelle “That’s great because I’ve got mysteriously 22.5% too”
How is this assessment of fund performance relative for clients to determine the most appropriate fund for their retirement savings? Do they expect every member to jump ship to the best performing fund every twelve months?
Total waste of resources in my opinion.
Will there be a stampede to exit these funds waiting in the wings as this news filters out to the retail market…
This ‘worst fund’ line is going to end in tears as more people moving into funds that are incentivized to take on higher (and likely excessive) risk.
This policy has been formulated by bureaucrats with no direct understanding of financial markets or the implications of what it entails.
Most ‘balanced’ industry fund options are already extremely heavily invested in growth assets. This works well in up markets but will be disastrous in a downturn.
This ‘reform’ will ensure that workers take on more uninformed risk and that there will be less investor choice – it’s an accident waiting to happen
Couldn’t happen at a better time don’t you think – markets up during Covid etc? What could possibly go wrong?
Let’s pray that the Catholic and Christian funds can return to the path of righteousness.
Ha ha……Been on my hands and knees all year…Praying for my Financial Planning Business, Praying for my FASEA result, My Audit result, My 10 year look back program..Praying for a Paraplanner to come along….Praying for Covid Crash to recover…it’s just goes on an on. .and “she’s” not listening.
If you are praying for your financial planning business please change gods because the current one isn’t listening. Hopefully she will come good for us all