MySuper Performance Test Results and New Super Comparison Tool

This year marks the beginning of annual performance tests on MySuper products, run by the Australian Prudential Regulation Authority (APRA). The requirement was introduced as part of the Federal government’s Your Future, Your Super reforms, and aims to hold super funds to account for underperformance and enhance industry transparency. The first annual test of 76 (out of 80) MySuper products from various super funds or registrable superannuation entities (RSEs) found that 13 products failed to meet the benchmark. These products will need to notify their members of the failed test and make the improvements needed to ensure they pass next year’s test.

Other changes introduced as part of Your Future, Your Super include access to a new interactive online super comparison tool, YourSuper, hosted by the ATO.

APRA notes that there are around 80 MySuper products from various super funds or RSEs in the Australian market. It assessed 76 out of the total 80 products with at least five years of performance history against an objective benchmark, and found that 13 products failed to meet the benchmark.

“It is welcome news that more than 84 per cent of products passed the performance test”, said APRA Executive Board Member Margret Cole, “however, APRA remains concerned about those members in products that failed … Trustees of the 13 products that failed the test 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 them.”

Trustees of failed products are required to write to members by 27 September 2021 advising them of their performance test outcome and providing details of the ATO’s YourSuper comparison tool. If the product fails the performance test in two consecutive years, the RSE licensee will be prohibited from accepting new beneficiaries into that product.

The YourSuper comparison tool – available on the ATO website and via your MyGov account – allows users to display a table of MySuper products ranked by fees and net returns (updated quarterly), as well as compare up to four MySuper products at a time in more detail. When comparing products, the investment performance is listed in an easy-to-understand form. A “Performing” result indicates that the product has met or exceeded the performance test benchmark. “Underperforming” means the product has not met the benchmark and “Not assessed” means the product has had less than five years of performance history, so has not yet been rated by APRA.

The data used by APRA for the performance test includes:

• net investment return;
• strategic asset allocation;
• total investments;
• administration fees;
• indirect cost ratio and administration costs;
• administration-related tax expense/benefit;
• advice fees;
• indirect cost ratio advice costs; and
• advice-related tax expense/benefit.

The performance test itself has two parts. It involves the assessment of investment performance relative to a benchmark portfolio created using the product’s strategic asset allocation, and an assessment of administration fees charged in the last financial year relative to the median fee charged for the category of product. If the product underperforms the combined test by more than 0.5%, the product is deemed to have failed the test.

Remember, the results of performance tests conducted by APRA only relate to MySuper products, which are basic super accounts without unnecessary features and fees. RSEs usually offer multiple products in addition to MySuper products, so don’t panic if you see the name of your super fund (RSE) on the list of underperforming products. However, if you see the name of your specific product or receive a letter indicating that the fund you’re in has failed the performance test, it may be time to investigate the reasons why or switch to a different product.

Important: Clients should not act solely on the basis of the material contained here. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We, therefore, recommend that our formal advice be sought before acting in any of the areas.