ASIC warns of regulatory action after reviewing superannuation funds responses to MySuper performance test fails

The corporate regulator is warning super funds over poor communication with members following their failures in the 2022 performance tests.

Assistant Treasurer Stephen Jones warned super funds in January they should do more to improve communications to members, noting 20 per cent of funds consistently failed to respond to members within the 45 day time frame.

The corporate regulator has lashed four superannuation funds for their communications to members in the wake of failing the 2022 MySuper performance tests.

The Australian Securities and Investments Commission said its review of the four trustees that failed the 2022 performance test, for their five products, showed many were reactive in approaching the performance tests.

The funds pinged by ASIC included BT Funds Management, Equity Trustees, Energy Industries Superannuation, and SCS Super.

Only SCS Super has merged with another fund in the wake of failing the 2022 test, in a deal struck with Unisuper to be absorbed by the $115bn giant.

ASIC said many of the funds it had reviewed had inconsistent or unclear communications to members, calling on funds to consider “from a members’ perspective what communication members will receive and when”.

ASIC commissioner Danielle Press said the performance tests were aimed at supporting product performance “so members can make informed financial decisions for their retirement”.

“Trustees that fail the performance test need to get the balance right in their communications – they need to be transparent and factual about the performance of the failed product,” she said.

Ms Press said some funds had taken into account the guidance offered by ASIC last year.

“Trustees complied with the mandatory disclosure obligations to notify their members of the failure, and had good processes to ensure that no new members joined the closed products,” she said.

“However, we found that some trustees need to design and deliver performance communications with their current members in mind.”

ASIC said it would continue to monitor underperformance notifications by superannuation funds and other communications by trustees that failed performance tests.

The regulator warned funds which failed to comply with disclosure obligations risked exposing themselves to action “if appropriate”.

Annual performance tests for superannuation funds were introduced under the previous Coalition government’s Your Future, Your Super legislation and are overseen by the Australian Prudential Regulation Authority.

The funds which failed the 2022 test for the second year running were barred from taking on new members into the MySuper products.

The Albanese government has said it would extend the performance test rankings into more retirement products in the 2023 tests, with ESG focused funds to be scrutinised.

However, the test will be rejigged, with APRA to investigate complaints some funds have been hugging the market benchmark.

The performance window could be extended to cover 10 years, up from its current eight limit under the draft changes released last week.

Assistant Treasurer Stephen Jones warned super funds in January they should do more to improve communications to members, noting 20 per cent of funds consistently failed to respond to members within the 45 day time frame.

He warned funds which failed to improve communications “will find themselves not just the subject of regulatory attention”.

“Focus on your members; respond to complaints more quickly; invest more in your relationship with members; and do better at understanding the needs of those who trust you with their contributions,” Mr Jones said.