Thirteen large Australian super funds have been given a “fail” mark for super products which charge high fees and have underperformed over a five year period.
As part of the very first release of the Australian Prudential Regulation Authority's (APRA) Your Future, Your Super performance test, 76 MySuper funds were analysed to improve efficiency, transparency and accountability.
The data found almost 1.1 million Aussies have around $56.2 billion invested in underperforming superannuation funds.
MySuper funds are default accounts for people who do not choose their own superannuation fund when they start work.
Each Aussie super fund has a range of products offered to members and the new performance test related to those specific products, not the fund as a whole.
Out of the 76 MySuper products judged against the benchmark for the Your Future, Your Super reforms, 13 were found to have failed.
All Aussies who were part of one of the underperforming superannuation funds, will receive a letter from their fund pointing them to the ATO’s super comparison tool.
The federal government estimates the Your Future, Your Super changes will save workers $17.9 billion over 10 years.
"Products that fail the annual performance test again next year will be closed to new members until their performance improves," Treasurer Josh Frydenberg said.
Importantly, eight products have exited the market since the performance test was brought in, he said.
APRA executive board member Margaret Cole put the failing funds on notice, saying they now have an important choice to make.
“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,” Cole said.
“APRA has intensified its supervision of trustees with products that failed the test and has requested they provide a report identifying the causes of their underperformance and how they plan to address them.”
Super trustees will now have to monitor their failing products and report relevant information to APRA. This will include the movement of members and fund outflows.
APRA is also engaging with trustees at risk of failing the performance test next year to ensure they take steps to improve performance, and to understand their contingency plans.
APRA said these contingency plans must include an orderly transfer of members to another fund if APRA requires it.
Meaning, next year some Aussies may be moved to another super fund if it is deemed necessary.
“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,” Cole said.
Which super products failed the test?
In alphabetical order, the 13 products that failed to meet the new benchmark performance test are:
AMG Super - AMG MySuper
ASGARD Independence Plan Division two - ASGARD Employee MySuper
Australian Catholoic Superannuation and Retirement Fund - LifetimeOne
AvSuper Fund - AvSUper Growth (MySuper)
BOC Gases Superannuation Fund - BOC MySuper
Christian Super - My Ethical Super
Colonial First State FirstChoice Superannuation Trust - Colonial First State FirstChoice Superannuation Trust
Commonwealth Bank Group Super - Accumulate Plus Balanced
Energy Industries Superannuation Scheme-Pool A - Balanced (MySuper)
Labour Union Co-Operative Retirement Fund - MySuper Balanced
Maritime Super - MYSUPER INVESTMENT OPTION
Retirement Wrap - BT Super MySuper
The Victorian Independent Schools Superannuation Fund - VISSF Balanced Option (MySuper Product)
Members of these super funds will receive a letter from their fund informing them they have failed the performance test.