Four superannuation products have now closed to new members as a result of failing the Your Future Your Super performance test for a second time.
However, only five products failed the second iteration of the benchmark test released on Wednesday morning; the inaugural test saw 13 funds fail.
Some 69 MySuper products with at least five years performance history were measured based on investment performance, fees and costs.
The four repeat failed funds are Australian Catholic Superannuation and Retirement Fund’s LifetimeOne, Energy Industries Superannuation Scheme-Pool A Balanced (MySuper), BT Super MySuper and AMG MySuper.
Westpac Group Plan MySuper failed for the first time and will be required to notify members by 28 September 2022.
APRA stated three of the four repeat failures already had plans to exit the industry with 500,000 members expected to transfer before the 2023 performance test.
Transitions
The Westpac and BT products have been transferred to Mercer as part of the acquisition of Westpac’s superannuation business.
A spokesperson for BT tells Professional Planner the fund has worked hard to improve member outcomes including reducing fees.
“We are disappointed with this outcome and have recently announced our intention to merge the BT Personal and Corporate superannuation funds with Mercer Super.”
Mercer Super has passed the performance test both times.
“We continue to work in our members’ best financial interests and by being part of a much larger Mercer fund BT members will have the potential to benefit from stronger performance, lower fees with most members to see a fee reduction of around 25 per cent off standard fees, more investment choice and broader members services,” the BT spokesperson said.
Win for APRA
APRA member Margaret Cole said the overall results highlighted the improved outcomes that have been achieved for superannuation members over the last 12 months.
“Pleasingly, almost 96 per cent of MySuper superannuation members are now in a performing MySuper product, equating to 13.1 million member accounts,” she said in a media release supporting the results. “Equally positive is that the performance test has contributed to over 5.1 million MySuper members (just over 38 per cent) now paying lower fees than they were last year.”
The annual performance test was introduced last year to protect members from poor outcomes and hold trustees accountable for the implementation of their investment strategy.
How the performance test impacts adviser has been a matter of debate with some arguing advisers will be dragged into dealing with the consequences of a client being in an underperforming fund.
The test was due to be expanded this time around to include trustee-directed products (multi-sector choice products), but new financial services minister Stephen Jones announced in July he would pause the extension in addition to conducting a review of the test.
Feeling the power
Wednesday’s result was vindication for several funds including CFS which partnered with BlackRock last year to help improve its MySuper product after failing in the inaugural test.
CFS Superannuation chief executive Kelly Power cited that collaboration along with reducing fees to over 770,000 members over the last three years contributed to the improved result.
“Today’s outcome demonstrates our commitment to becoming one of Australia’s leading super and investment providers, with our members set to benefit from more than $430m being invested over the next four years to deliver better products and services,” Power said.
