28 October 2021
Patrick Commins – Economics Correspondent
Five of the 13 super funds that failed this year’s inaugural investment performance test are actively looking to merge with other funds, APRA has said.
The Australian Prudential Regulation Authority chairman Wayne Byres told a Senate estimates committee hearing on Thursday that “the trustees of those 13 products now face an important choice: 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 their members”.
APRA figures from August 31 show there were one million members in the 13 super funds that failed the performance test, with assets totalling $56bn.
The trustees of the failed products included some big names, including Colonial First State and Asgard, alongside others such as Maritime Super and Christian Super.
The 80 MySuper products that were subject to the test represented 134 million members, with a combined $844bn in assets under management.
Recently appointed APRA member Margaret Cole said the actions the regulator was taking in regards to funds that flunked the test were “intensified supervisory activity and a great deal of contact with those trustees of those failed funds”.
Ms Cole said APRA had already received or expected to receive shortly “contingency plans” that would show how the trustees planned to improve their investment performance and pass next year’s test.
The Your Future, Your Super reforms, which kicked off on July 1, require APRA to conduct an annual performance test for MySuper products, which are also ranked via an online tool offered by the Australian Taxation Office.
From July 1, 2017, all member accounts in default investment options have been required to be invested in MySuper products, which are now subject to annual performance tests and ranked online. A fund that fails the performance test in two consecutive years is not able to take on new members, and will not be able to reopen to new members until their performance improves.
Ms Cole said the “biggest lever” trustees could pull to improve their performance would be to reduce fees – a key objective of the YFYS legislation.
Superannuation Minister Jane Hume noted that since the Morrison government introduced the reforms, 37 of 81 MySuper funds had cut their fees.
Ms Cole said “where it appears there will be difficulty passing next year’s test”, the regulator was pushing trustees to make an “appropriate” merger.