Your Future, Your Super: Success for MySuper funds as 37 trustee-directed products fail APRA test,
Backers of 37 trustee-directed products will write to their members after failing to pass APRA’s Your Future, Your Super performance test, as industry calls for it to be broadened.
All MySuper superannuation funds have passed the prudential regulator’s Your Future, Your Super performance test for the first time, while backers of 37 trustee-directed products that failed will have to write to their members in the coming weeks.
There are now calls for the Australian Prudential Regulation Authority to broaden the remit of the test to ensure it captures more products and diverse strategies across the sector.
The success of all MySuper products by APRA in 2024 comes after one failure in 2023 and five in 2022. Thirteen products were not able to pass the inaugural test in 2021.
MySuper funds are a default super option used by the vast majority of Australians.
They are simpler and lower cost, and come in the form of a balanced product.
Of the trustee-directed products, 37 of 192 platform products failed to meet the test benchmarks, including 27 products that have failed for a second time and will be closed to new members.
The 37 failed trustee-directed products were concentrated in products offered by two trustees: 36 from NM Superannuation Proprietary Limited, which is controlled by AMP, and one from IOOF Investment Management, owned by Insignia Financial.
The 36 tied to AMP represented about 1.8 per cent of the 850,000 total accounts across AMP super and pension products, and most have been closed to new members. AMP’s MySuper products delivered returns of more than 11 per cent for a majority of its clients.
AMP group executive, platforms, Edwina Maloney told The Weekend Australian that AMP took its obligations to customers and the regulator seriously, but held concerns about some aspects of the test, particularly the impact for customers investing through wrap platforms.
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“These investment options are only tested because they are inaccurately classified by the government as ‘trustee directed’. We don’t believe these options are ‘trustee directed’, meaning the current test is delivering misleading results and causing confusion and potential financial harm for consumers,” she said.
“This current test assesses 2 per cent of Australia’s Choice platform investment market and excludes many of the platforms with the highest administration fees, making it impossible to use it as the basis for properly informed investment decisions and product comparisons.”
Ms Maloney said that AMP was now assessing the best approach for customers invested in these options and would communicate with those affected and their advisers.
“Consumers and their advisers have made active and informed choices to invest in these options based on individual circumstances and objectives. This is very different for most members who are invested in default MySuper superannuation funds.”
None of the 398 non-platform products assessed failed to meet the benchmarks. In 2023, the first year that choice products were included in the test, 76 platform and 20 non-platform trustee directed products failed the test.
APRA deputy chair Margaret Cole said trustee activity to eliminate underperforming products, through the consolidation, restructuring or withdrawal of investment offerings, has contributed to a sharp fall in the number in test failures by trustee-directed products.
“These are pleasing results but, as trustees well know, past performance is no guarantee of future success. Even based on existing performance, there is significant scope for improvement across key drivers of performance, including costs and fees, and investment returns,” she said.
“This year’s results demonstrate the progress being made to address underperformance. At the end of June, all 15.7 million MySuper member accounts, with combined assets of nearly $1.1 trillion, were invested in performing products.”
The annual performance test is designed to increase industry transparency and improve member outcomes by assessing the long-term performance of superannuation products against tailored benchmarks, with consequences for those that fail.
The Association of Superannuation Funds (ASFA) chief executive Mary Delahunty said the superannuation industry has made significant progress in improving returns for members since the performance test was introduced in 2021. She added that while it had been effective, APRA needed to make further refinements as it did not capture every aspect of fund performance.
“We acknowledge that it’s a tool that considers a very limited range of indicators. Some members may choose to pursue strategies that will likely underperform in the short-term, while anticipating long-term outperformance. This is especially relevant to ethical or green investment strategies,” she said.
“We call for further refinements to the test to ensure it fully reflects the diverse strategies employed across the industry, so that we are able to both maximise choice for members and secure their long-term retirement goals.”
Super Consumers Australia director Xavier O’Halloran said the performance test has been a game changer for super, but it still left 1.3 million accounts worth $451bn that belonged to retirees in the dark about whether their money was being managed appropriately.
“Retirees deserve to know if their super investments are good value for money,” he said.
“APRA has been sitting on this data for several years while retirees languish in accounts serving up high fees and poor performance. We are calling on APRA to release the data before the end of the year so that Australian retirees can avoid poor performing super products.”
Mr O’Halloran said that APRA had collected data on historical performance of retirement account-based pensions since 2022, but had not published this data.
Total assets examined by APRA include $1.08 trillion in MySuper products, $366bn in trustee-directed and non-directed products.
The test has been used to boost accountability for funds that have flailing performance and considered net investment returns, asset allocation, fees and costs. It typically makes an assessment over an eight-year period, if the fund has been established long enough.
Last year AMG Super’s AMG MySuper was the only MySuper product that failed to meet the test benchmark, having done so for a third year in a row before owner Acclaim Wealth shut the fund entirely.
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