On 31 August 2022, APRA published the outcomes of its second annual test. Of 69 super fund products tested, 64 passed and 5 failed. Trustees of the fund that failed for the first time, Westpac Group Plan MySuper, must notify members of the result by 28 September. The products that failed the test for a second time are now closed to new members: Aust Catholic Super Lifetime One, Energy Super Balanced MySuper, BT Retirement Wrap MySuper, AMG MySuper.
As part of the government’s Your Future, Your Super reforms, which were designed to make sure the superannuation system delivers better outcomes for members, the annual APRA MySuper performance test:
- applies to all default (“MySuper”) products,
- requires all funds that fail the test to advise their members of that fact, and
- prohibits products that fail the test two years in a row from accepting new members until their net investment performance improves.
We are pleased to advise that Australian Retirement Trust’s MySuper product (Super Savings Lifecycle Investment Strategy) and QSuper Lifetime passed the test.
The APRA Performance Test compares:
- the average investment return achieved by the fund (net of investment and administration fees) over a period of at least 5 years
- the return that could have been achieved if the fund had invested in equivalent benchmark products set by APRA (net of the median level of fees) over that same period.
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A fund fails the test if their returns were lower than the average by a difference of at least 0.5%.
What should advisers consider for clients?
If your clients receive a notice advising that their fund failed the performance test, it may be wise to discuss potentially reviewing their superannuation provider. Unless they are comfortable with the reasons why that fund failed the test, or the actions it is taking (or has taken) to address the failure, then it may be time for you to discuss with your client if they should consider moving to a better performing fund.
At the time of any performance test it is important you consider:
Fund choice: has a client’s chosen fund, not the investment option, been impacted?
Risk of failure: is that fund at risk of further failure?
Perception risk: will clients question fund choice?
Business impact: do you have alternatives in place? What might your client conversations be?
The performance test, and the attention it brings, is a good time for you to assess your own performance, benchmarks and client expections.
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