Australia’s five worst superfunds revealed

APRA’s retirement czar, Margaret Cole, said the performance test, introduced last year, was improving outcomes for members. In 2021, 13 funds failed.

“Pleasingly, nearly 96 percent of MySuper Retiree members now have a MySuper product up and running, which equates to 13.1 million member accounts.

“Equally positive, the performance test has contributed to more than 5.1 million MySuper members (just over 38 per cent) now paying lower rates than last year,” said Ms Cole.

Failed Funds Expelled

The performance test was a key element of the previous Morrison government’s sweeping retirement reforms, which passed Parliament last June.

It was legislated against the backdrop of a rapid consolidation in the $3.3 trillion retirement sector, with the prudential regulator actively pushing small funds to merge.

Performance testing has proven to be an effective way to get the worst funds out of the system. Of the 13 funds that failed last year, 10 have exited the system by merging with a better fund, or plan to do so.

This includes three of the four funds that have now failed twice, including Westpac-owned BT, which is planning a merger with retail giant Mercer.

The annual test evaluates how the default MySuper products have performed over the past eight years, adjusted for fees, relative to an APRA-calculated benchmark.

The benchmark, which differs between funds, measures what a product should have returned over the last seven years based on its asset allocation and the average level of fees in the super sector.

Funds that underperform their benchmark by more than 0.5 percentage point are considered to have failed.

Underperforming funds could be banned from accepting new members into their MySuper products if they fail the test twice in a row.

The new laws require the five funds that failed the test to send a standardized letter to their members telling them their super is sitting on a product that “has performed poorly.”

The letter tells members they can find a “good-performing” fund on the government’s YourSuper comparison tool, which launched last year.

The tool, which can be accessed through MyGov and the Australian Taxation Office website, ranks default MySuper products by their annual performance over seven years and the fees charged to members.

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