3 September 2021
2021 marks the beginning of annual APRA performance tests on MySuper products. The requirement was introduced as part of the government’s Your Future, Your Super reforms and is aimed at holding funds to account for underperformance and enhancing industry transparency. The first annual test of 76 (out of 80) MySuper products from various super funds or RSEs found that 13 products failed to meet the benchmark. These products will need to notify their members of the failed test and make improvements needed to ensure they pass next year’s test.
“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…Trustees of the 13 products that failed the test now face an important choice: they can urgently make the improvements needed to ensure they pass next year’s test or start planning to transfer their members to a fund that can deliver better outcomes for them.” – APRA Executive Board Member Margret Cole
According to APRA, trustees of failed products will need to write to members by 27 September 2021 advising them of their performance test outcome and provide details of the ATO’s YourSuper comparison tool. If the product fails the performance test in two consecutive years, the RSE licensee will be prohibited from accepting new beneficiaries into that product.
The ATO YourSuper comparison tool allows users to display a table of MySuper products ranked by fees and net returns (updated quarterly), as well as compare up to 4 MySuper products at a time in more detail. When comparing products, the investment performance will be listed in easy to understand format. A ‘Performing’ result indicates that the product has met or exceeded the performance test benchmark. ‘Underperformin’ means the product has not met the benchmark and ‘Not assessed’ means the product has had less than 5 years of performance history and has not been rated by APRA.
The data used by APRA for the performance test include:
- net investment return;
- strategic asset allocation;
- total investments;
- administration fees;
- indirect cost ratio and administration costs;
- administration-related tax expense/benefit;
- advice fees;
- indirect cost ratio advice costs; and
- advice-related tax expense/benefit.
The performance test itself is a two-part test. It involves the assessment of investment performance relative to a benchmark portfolio created using the product’s strategic asset allocation, and an assessment of administration fees charged in the last financial year relative to the median fee charged for the category of product. If the product underperforms the combined test by more than 0.5%, the product is deemed to have failed the test.
Remember, the performance test results conducted by APRA only relates to MySuper products which are basic super accounts without unnecessary features and fees. RSE usually have multiple products in addition to MySuper products, so don’t panic if you see the name of your super fund (RSE) on the list of underperforming products. However, if you see the name of your specific product or receive a letter indicating that the product you’re in has failed the performance test, it may be time to investigate the reasons why or switch to a different product.
Superannuation can be confusing, if you need help to work out which super product you’re in or whether you’re in an underperforming MySuper fund, we can help. Call us today at our offices or email email@example.com
**The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.