The Australian Prudential Regulation Authority’s (APRA’s) inaugural MySuper Product Performance Test has come as a harsh reality check for 13 superannuation funds. This has put billions of dollars at stake for millions of people.
The underperformers include some of the prominent names as well: Westpac’s BT Super Fund, Commonwealth Bank Group Super and Christian Super’s MyEthical option.
A total of 13 super products failed the APRA test. These failed products will impact a million super fund investors, with AU$56 billion at stake.
APRA said that it was “engaging with trustees at risk of failing the performance test next year to ensure they take the steps necessary to improve performance, and to understand their contingency plans”.
Now these funds have four weeks to send a letter to their one million members informing them of the result and suggesting they switch funds.
“These contingency plans must include pre-positioning to be able to give effect to an orderly transfer of members to another fund, if required,” APRA said in a statement.
The failed members will also have to explain to the APRA the cause behind the failure and how they are going to address those. “Trustees have to monitor their products closely and report important information to APRA – including relating to the movement of members and outflow of funds,” APRA Executive Board Member Margaret Cole said.
There are 80 MySuper products in Australia right now. APRA has assessed 76 MySuper products with at least five years of performance history against the objective benchmark. Of the 80 MySuper products, 67 have passed the test.
The failed products control 6% of the total assets of all the super funds combined. The total assets of all MySuper products amount to AU$900 billion – of which products worth AU$844 billion have passed the test.
The failed MySuper products also cater to the 7% of the 14-million-member accounts.
The share of member accounts and share of assets cornered by failed funds is way lower than share of total number of failed funds. Failed funds make up 16% of the all the super funds.