The Australian Prudential Regulation Authority (APRA) has failed five superannuation funds in a performance test against the industry benchmark.
Super funds were reviewed to assess investment performance as well as fees and costs, with some failing for the second time in two years.
Now, four of those funds can no longer accept new affiliates, according to APRA.
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APRA evaluated 69 MySuper products with at least five years of performance history and released results Wednesday that showed overall system improvement.
Westpac Group’s Retirement Wrap failed for the first time, while for four other funds this was the second time they had failed.
Those funds were BT Super’s Retirement Wrap (also owned by Westpac Group), Energy Industries Superannuation Scheme (EISS Super) Balanced MySuper, Lifetime One’s Australian Catholic Superannuation and Retirement Fund, and AMG Super.
“The four products that failed the test a second time are now closed to new members,” APRA said in a statement.
“Of those four products, three were offered by trustees with plans to exit the industry.”
These funds have until September 28 to inform their members.
There are also plans to help the 500,000 members of those three products transfer to new MySuper products before the next performance test in 2023.
MySuper products are where most Aussies have their super investment, according to Finder, as it’s the simple and often low-cost option often offered by default to members.
Australian Superannuation Fund Association CEO Martin Fahey told 7NEWS.com.au: “This affects probably 60 per cent of all Australians who are in an APRA chosen fund.”
“People who don’t make a choice as to their background choice and it’s predetermined in MySuper.
“This is the primary product that is invested in Australian equities, international equities, infrastructure and property, and for the vast majority, this is the right product to be in.”
Fahey agreed that the test has been successful in removing some of the “usual underperforming” funds.
“So what we see here is a mechanism that, over the two years, has acted to allow us to solve the problem of performance as defined by the test, and the vast majority of people in funds are moving to new funds.” .
The failure of a fund has a considerable effect
The test results for member accounts may look much worse – APRA shows 44,000 accounts failing for the first time and 559,000 accounts failing for the second time – but Fahey told 7NEWS.com.au that a big player is skewing the results. results.
That fund is BT Superfund, owned by Westpac, one of the funds that went bankrupt for the second time.
“What we have is a particularly large fund, BT, which accounted for a very significant number of accounts.”
“If you extract that, the numbers are even more amazing than they are.”
There were 13.1 million member accounts that passed the performance test.
APRA member Margaret Cole said the overall results highlighted the better results that have been achieved for retiree members over the last 12 months.
“Pleasingly, nearly 96 percent of MySuper retirement members are now on a working MySuper product, which equates to 13.1 million member accounts,” Cole said.
In 2021, 13 MySuper products failed the test, of which four have since come out. Five other products that failed last year’s performance test passed this year.
The vast majority of people inside those failed funds have moved to new funds as part of a merger with other funds that passed the performance test, Fahey said.
How to get the most out of your superfund
Fahey says the performance test was successful, but the next step in reaching a global standard is for people to start participating in his super funds.
“Contact your fund, talk to your fund, get advice from your fund,” he told 7NEWS.com.au.
Fahey shared some tips to make sure you’re getting the most out of your superfund.
“If you have more than one superfund, consider consolidating your fund,” he said.
“Review your fund’s insurance to see if it’s right for you.
“Look at the investment option. if you’re a younger person, you may be at a little more risk in terms of a growth option; otherwise, you are likely to find yourself in a balanced option.
“You want to make sure your fund is invested in things that reflect what you care about from an ESG (environmental, social and governance) standpoint, just like your fund pursues strategies around renewable energy.
Fahey says that if you’re not satisfied, changing your fund is easy and you can check how they qualify through the ATO website.
When looking for the best-performing funds, he advises not to “just look at the last five years, look at how the performance has been for ten years or more, because for the vast majority of people, retirement is three, four, five decades of life. return on investment”.