The Australian Prudential Regulation Authority (APRA) is an independent government body that regulates financial institutions, including super funds. APRA monitors the performance of super funds and applies a performance test against a benchmark, then publishes the results to help Australians make informed decisions about their superannuation.

A total of 76 MySuper investment options have been graded as either “pass”” or “fail”, based on the Australian Prudential Regulation Authority’s (APRA) test of comparison of fees versus performance over a seven year period. The first annual performance test revealed that $56.2 billion is invested in underperforming products, with these products holding almost 1.1 million accounts. The public naming and shaming of underperformers is part of the Federal Government’s “Your Future, Your Super” reform, which came into force on July 1, 2021.

The reform is designed to weed out underperformers from Australia’s $3 trillion super system and help lower the high cost of fees.
Jane Hume, the Minister in charge of Super, says the new benchmarking plan would help ensure “trustees of funds keep their eyes firmly on the financial returns of their members”.

Are the Super numbers fair and reliable?

This test looks only at the “My Super” accounts and does not take into consideration a portfolio that may be designed by you (or with the help of a financial adviser) so you don’t need to get alarmed if your fund has been named. If you haven’t received notification from your super fund, it is advisable that you research your particular investment option and insurance cover to ensure that it is appropriate to your particular financial circumstances.

“The test results has put a cat amongst the pigeons”.

Why is it so important to check your investment returns and fees?

“By earning 1 per cent higher net return over a 30-year period, you could be 20 per cent better off at retirement.”

Look at it this way; you may hold multiple super accounts and haven’t had time to choose one particular fund that has reasonable fees, cheap insurance premiums and outstanding returns. Do your homework and get your adviser to run over the numbers for you to make sure you are in the most appropriate fund for you.

What this annual testing will do is force super funds to allocate a higher proportion of their fund into growth assets that are likely to perform better than fixed interest over a long period of time. However, the consequences are far reaching in that this will likely increase the cost to the super fund, and to the members, by unnecessarily buying and selling growth assets to achieve the industry growth target.

If you received a letter advising that your fund has failed, you are placed in a difficult situation.

Some questions you might like to consider:

  1. Do I give my fund the next 12 months to improve its performance?
  2. What if I have an insurance claim pending and cannot move my super fund?
  3. Can I transfer most of my super balance to a better investment option, but keep my insurance?

The above are “What If” scenarios and may not apply to you, and while I am somewhat partial, I would encourage you to get advice if you are in doubt. Even if it is a five minute call to your planner to get some degree of reassurance, just make the call!

If you are confused or don’t know what to do, use the ATO comparison tool

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