How did the most popular super funds perform in FY23?
The latest results from the annual superannuation performance test are in. Super members should pay close attention to the results, because the figures make for interesting reading.
At a headline level, an estimated 60,000 superannuation members will soon be receiving, or may have already received letters in the mail informing them that their investment option failed the most recent benchmark performance test by the Australian Prudential Regulation Authority (APRA).
The regulator is required to conduct an annual performance test for superannuation products in order to hold registrable superannuation entities (RSE) licensees to account for underperformance through greater transparency and increased consequences.
During the most recent period, the test was expanded to evaluate trustee directed products (TDPs), a subset of the ‘choice’ segment. Trustee directed products are multi-asset products where the trustee has control over the design of the product’s investment strategy.
Trustee Directed Products
Across the board, approximately $4 billion in retirement savings, mostly spread across retail funds managed by AMP and Insignia Financial, failed APRA’s test.
In light of the performance of these funds, members have been urged to reassess their options.
APRA requires the trustees of the funds that fail its test to send a letter to members encouraging them to explore alternative investment options. It reads, “you should think about moving your money to a different super investment option or fund”.
One comment that will be particularly important for members is the following - “you could save thousands of dollars more for when you retire by switching to a better investment option or super fund.”
We’re highlighting this because super members would be well served to monitor the performance of their fund each and every year to ensure their retirement money is working smarter, not harder.
As it turns out, 96 investment options across the ‘choice’ segment failed the benchmark test.
APRA confirmed that three-quarters of products that failed its annual Your Future, Your Super test were concentrated in offerings from four super fund trustees controlled by AMP and Insignia.
TDP Non-Platform Products
Looking at the breakdown in further detail, 480 non-platform products passed APRA’s test, while 20 fell short.
By account numbers, that represents 36,000 affected member accounts, whereas 3.7 million passed the assessment. The total value of assets held in products that failed the test was $1.7 billion, as opposed to $338.9 billion in assets that passed the test.
Non-platform products which failed the 2023 APRA benchmark test included:
Australian Meat Industry Superannuation Trust - High Growth Super Option
Australian Retirement Trust - QSuper Socially Responsible
Citibank Australia Staff Superannuation Fund - Bonds Plus
ClearView Retirement Plan
IPS Active Dynamic 50
IPS Active Dynamic 70
IPS Active Dynamic 90
Crescent Wealth Superannuation Fund
Crescent Wealth Super Balanced
Crescent Wealth Super Conservative
Crescent Wealth Super Growth
OneSuper
AusPrac High Growth Option
Growth Option
High Growth Option
Moderate Option
SS High Growth Option
Retirement Portfolio Service
MoneyForLife Index Balanced
MoneyForLife Index Conservative
OnePath Managed Growth
Smart Future Trust
smartMonday High Growth - Active
smartMonday Moderate †- Index
Tidswell Master Superannuation Plan - Cruelty Free Growth
TDP Platform Products
In terms of platform products, a total of 305 investment options were examined by the Australian Prudential Regulation Authority.
A total of 229 products, or 75% of investment options passed APRA’s test. This means 76 investment products failed the performance test.
Investment products that failed the performance test feature 24,000 member accounts, or 12% of all member accounts. That represents 12% of all assets in TDP platform products, which in monetary value is approximately $2.3 billion in assets.
While there are too many individual products to list, the registrable superannuation entities behind said failures included:
AvWrap Retirement Service
IOOF Portfolio Service Superannuation Fund
MLC Superannuation Fund
Oasis Superannuation Master Trust
Premiumchoice Retirement Service
Retirement Portfolio Service
The Bendigo Superannuation Plan
Wealth Personal Superannuation and Pension Fund
The full list of TDP products that failed APRA’s performance test can be found here.
MySuper Products
It was a better story for MySuper products, of which 64 were tested in FY23. Of this total, 63 (98.4%) passed the APRA test, while just one product failed.
The one product that failed, AMG MySuper, recorded a repeat fail, with the fund failing APRA’s assessment a third time. The consequence of this result is that the product will remain closed to new members.
APRA estimates that approximately 4,000 member accounts are affected by the failure of the AMG MySuper product, which corresponds to around $151.1 million in assets.
On the other hand, 14.2 million member accounts, and $910.5 billion in assets were in investment products that passed the prudential regulator’s test.
The 2023 results showcase the second consecutive period of improvement. In 2021, 13 MySuper products covering 1.1 million members failed APRA’s performance evaluation.
Meanwhile, five products spanning around 600,000 members failed last year’s test as set out by the Your Super, Your Future legislation.
It follows a period where various funds merged in the immediate aftermath of first-time test failures back in 2021.
Digesting the APRA Test Results
APRA assessed the fees and returns of ‘platform’ (wrap) and ‘non-platform’ options against industry benchmarks. Platform products fared worse than non-platform products, largely because of fees.
APRA also measured the performance of default superannuation funds with a MySuper product by comparing the net investment return (after expenses) against a benchmark portfolio with a similar investment mix.
For a MySuper product to pass APRA’s test, it must not underperform the relevant benchmark by 0.5% or more, annualised over a period as long as eight years.
Trustees of failed investment products must notify relevant members by September 28, 2023. If a product fails across two or more consecutive years, they cannot accept new members, albeit they are not obligated to close their product or exit the market.
Since APRA began testing MySuper investment products, nine underperforming funds have ceased operations. In 2023, APRA tested trustee directed products for the first time, which extended to 805 products.
Because this was the inaugural test for TDPs, it will not be until this time next year that we know whether any funds have failed the APRA test two years in a row.
Nonetheless, the results provide a baseline for super members to explore their investment options, particularly across platforms, where there are hundreds, if not thousands of options to choose from.
At the end of the day, the data suggests members in funds that failed the regulator’s assessment could be doing better with their super invested elsewhere.
If your super fund, or the super of a loved one is invested in a product that underperformed in 2023, and you receive(d) a letter encouraging you to explore your options, we can help you assess investment options to choose the most appropriate product for you.