One million Australians are tied to underperforming super funds, the prudential regulator says, after landmark changes to industry oversight came into effect.
But major players in the sector have questioned the Australian Prudential Regulation Authority’s (APRA) method for weeding out those laggards, saying the new ranking system may not present investors with the full picture.
On Tuesday, the federal government launched its Your Super comparison tool, a key component of the massive Your Future, Your Super bill.
The tool is based on APRA’s new performance tests for MySuper products, the default superannuation funds a company must offer new employees if they have not already chosen their own.
Of the 76 MySuper products assessed by APRA, 13 products failed to reach the benchmark.
Those funds represent $56 billion in assets, and 16% of the MySuper products assessed by APRA.
Four of the 80 products passed by virtue of having fewer than five years of performance history, the regulator added.
Funds highlighted by APRA for lagging performance include Commonwealth Bank Group Super’s Accumulate Plus Balanced, Christian Super’s My Ethical Super, and Colonial First State FirstChoice Superannuation Trust.
APRA has also circled:
- AMG Super: AMG MySuper
- ASGARD Independence Plan Division Two: ASGARD Employee MySuper
- Australian Catholic Superannuation and Retirement Fund: LifetimeOne
- AvSuper Fund: AvSuper Growth (MySuper)
- BOC Gases Superannuation Fund: BOC MySuper
- Energy Industries Superannuation Scheme-Pool A: Balanced (MySuper)
- Labour Union Co-Operative Retirement Fund: MySuper Balanced
- Maritime Super: MYSUPER INVESTMENT OPTION
- Retirement Wrap: BT Super MySuper
- The Victorian Independent Schools Superannuation Fund: VISSF Balanced Option (MySuper Product).
The 13 funds are not only listed as ‘Underperforming’ on the new Your Super portal, which opened on Tuesday.
“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,” APRA executive board member Margaret Cole said in a statement.
Those funds must also write to trustees before September 27 advising them of their underperformance, while suggesting they should consider different superannuation products — a free process which can be accessed through MyGov.
To prevent further underperformance, APRA says it is engaging with funds which could fall short in 2022.
In a statement, Industry Super Australia (ISA) expressed its support for a holistic fund ranking tool.
But the group, which counts over 5 million members, said APRA’s ranking system left much to be desired.
“ISA notes that the performance test recently introduced by the Government contains deficiencies that are not in the best financial interests of all super fund members and that will lead to outcomes inappropriately favouring some funds over others,” said chief executive Bernie Dean.
“This is a matter that ISA will continue to seek to have remedied.”
Nevertheless, ISA says funds listed as underperformers will not be referenced in its upcoming ad campaigns.
The Association of Superannuation Funds of Australia (ASFA) said APRA’s testing could go beyond assessing pure financial performance.
“Any product that falls half of one per cent (0.5%) below the median is labelled as failing, What the published test results don’t tell members is why, and by how much, their fund has failed the test,” said ASFA CEO Martin Fahy.
The APRA modelling does not consider suitability for individual risk profiles or ESG screening considerations, which may be more important to members than high year-on-year gains.
“This is the tyranny of benchmarks,” Fahy added.