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Results for APRA’s annual superannuation fund performance test were released at the end of August, and the verdict was mixed. MySuper options came away relatively unscathed while ‘choice’ options suffered much more widespread failure.
Choice options need to be actively selected, while MySuper is the default option you will be placed in if you don’t choose an alternative.
Part of the reason for the discrepancy in performance is that this is the third year of the test’s operation for MySuper, but the first time that choice investment options have been subject to scrutiny. Consequently, only one MySuper product (AMG Super MySuper) failed the test but almost 12% of choice options that were tested fell at the hurdle.
Last year, five MySuper options failed. Of those, four have merged with other funds and are no longer offered. The last failed for a third consecutive year – with its provider (AMG Super/Acclaim Wealth) closing the product in February 2024.
The Australian Prudential Regulation Authority (APRA) says the test is intended to hold super trustees to account for underperformance through greater transparency and increased consequences. So far, all products that have experienced two or more test failures have closed or are in the process of closing, demonstrating that the strategy appears to be working. Persistently underperforming products are being removed from the market.
The latest insights released by the regulator reveal that high fees and poor performance are largely concentrated in the sub-set of choice products offered via platform services.
How the annual performance test works
APRA is required to assess the performance of all MySuper products annually. This year, the requirement to test certain choice products has been added – after initially being planned to commence in 2022. The testing of choice products will continue in future years.
APRA uses data about performance, fees and strategic asset allocation (SAA) provided to them by mandatory super fund reporting as well as information about the return of indices that represent each asset class tested.
To perform the test, APRA constructs a benchmark portfolio that matches the strategic asset allocation of the product being tested. This benchmark is populated with the real return from the index that is used to represent each asset class – for example, the Australian shares portion is represented by the S&P/ASX 300 Total Return Index.
By combining the returns of each underlying index in the proportions they are represented in the option’s strategic asset allocation, APRA comes up with an expected return for that asset allocation if it earned a return matching the indices.
The return of the benchmark (after deducting representative fees and taxes) is then compared with the real return of the product after investment fees and taxes.
This year the performance history over at least six years and a maximum of nine years is included. If the product’s actual return over the testing period is lower than the benchmark return by 0.5% per year or more, the test is failed.
What the test is effectively doing is asking the question, “How did the real return of the product compare with what would be expected if it was passively invested in index funds with the same strategic asset allocation?”.
A complicating factor is that there is no index for alternative investments, so the benchmark for alternatives is instead made up of a mix of international shares and fixed interest.
Which Choice products are tested?
The first point that needs clarification here is the word ‘product’. When you think of a super product, you probably envision a super fund and all the investment options that fund offers. For the purposes of the performance test though, a product is an investment option. A super fund with 10 investment options is offering 10 super products – according to APRA.
Next, it should be noted that not all choice products are included in APRA’s performance test. To be included, a choice product must be a Trustee Directed Product (TDP). A TDP is an investment option that is offered in the accumulation phase, contains at least two asset classes, where the trustee has a degree of control or influence over the investment strategy.
This definition excludes many investment options offered via super platforms, where the investment management is completely independent of the trustee, conducted instead by investment management firms that are not associated. It does not exclude platforms entirely though, as a subset of the investments they offer are usually provided by the same entity as the trustee.
All up, a total of 805 choice products (investment options) were tested in 2023.
Choice products that failed
Of the 805 choice products tested, 96 failed to meet the test benchmarks – or just under 12%.
A high number of these failed products (76 of the 96) are platform products, a result attributed to high fees and a tendency towards liquid alternative assets and away from unlisted property and infrastructure.
What’s more, 75% of failed choice products are offered by just four trustees – N.M Superannuation, Nulis Nominees, Oasis Fund Management and OnePath custodians. You’re likely to know these trustees better by their brand names: AMP, MLC, Insignia (formerly IOOF) and OnePath/OneAnswer respectively. All these companies except N.M Superannuation/AMP are owned by Insignia Financial (formerly IOOF) after they purchased the MLC business from NAB and the OnePath business from ANZ.
Two industry super funds also make the list – the Australian Meat Industry Super Trust (AMIST) and Australian Retirement Trust (ART – the combined former QSuper and SunSuper). AMIST’s High Growth option and ART’s QSuper Socially Responsible options fell short.
Only one corporate fund appears – Citibank Australia Staff Super Fund, whose Bonds Plus option failed the test.
All other failed options are offered by retail funds, in a further blow for the future of the for-profit super sector.
View the full list of failed products
| Name of fund | Name of failed investment option |
|---|---|
| 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 |
| ClearView Retirement Plan | IPS Active Dynamic 70 |
| ClearView Retirement Plan | IPS Active Dynamic 90 |
| OneSuper | AusPrac High Growth Option |
| OneSuper | Growth Option |
| OneSuper | High Growth Option |
| OneSuper | Moderate Option |
| OneSuper | SS High Growth Option |
| Tidswell Master Superannuation Plan | Cruelty Free Growth |
| Crescent Wealth Superannuation Fund | Crescent Wealth Super Balanced |
| Crescent Wealth Superannuation Fund | Crescent Wealth Super Conservative |
| Crescent Wealth Superannuation Fund | Crescent Wealth Super Growth |
| Smart Future Trust (previously AON) | smartMonday High Growth – Active |
| Smart Future Trust (previously AON) | smartMonday Moderate – Index |
| Retirement Portfolio Service (OnePath) | MoneyForLife Index Balanced |
| Retirement Portfolio Service (OnePath) | MoneyForLife Index Conservative |
| Retirement Portfolio Service (OnePath) | OnePath Managed Growth |
| The Bendigo Superannuation Plan | Bendigo Growth Wholesale Fund |
| The Bendigo Superannuation Plan | Bendigo High Growth Wholesale Fund |
| AvWrap Retirement Service (IOOF) | MLC0398AU |
| IOOF Portfolio Service Superannuation Fund | MLC WS Horizon 4 Balanced Portfolio |
| IOOF Portfolio Service Superannuation Fund | OnePath Tax Effective WS Income Trust |
| IOOF Portfolio Service Superannuation Fund | OnePath W’sale Balanced Trust |
| IOOF Portfolio Service Superannuation Fund | OptiMix WS Balanced Trust – Class A |
| Wealth Personal Superannuation (AMP – MyNorth) | Experts’ Choice Balanced Fund |
| Wealth Personal Superannuation (AMP – MyNorth) | Experts’ Choice Conservative Fund |
| Wealth Personal Superannuation (AMP – MyNorth) | Experts’ Choice Diversified Interest Income Fund |
| Wealth Personal Superannuation (AMP – MyNorth) | Experts’ Choice Growth Fund |
| Wealth Personal Superannuation (AMP – MyNorth) | Experts’ Choice Property and Infrastructure Fund |
| Wealth Personal Superannuation (AMP – MyNorth) | Generations Balanced |
| Wealth Personal Superannuation (AMP – MyNorth) | Generations Balanced Index |
| Wealth Personal Superannuation (AMP – MyNorth) | Generations Defensive |
| Wealth Personal Superannuation (AMP – MyNorth) | Generations Growth |
| Wealth Personal Superannuation (AMP – MyNorth) | Generations Growth Index |
| Wealth Personal Superannuation (AMP – MyNorth) | Generations High Growth |
| Wealth Personal Superannuation (AMP – MyNorth) | Generations Moderately Defensive |
| Wealth Personal Superannuation (AMP – MyNorth) | Generations Moderately Defensive Index |
| Wealth Personal Superannuation (AMP – MyNorth) | ipac Inflation Plus 4 Strategy |
| Wealth Personal Superannuation (AMP – MyNorth) | ipac Inflation Plus 6 Strategy |
| Wealth Personal Superannuation (AMP – MyNorth) | ipac Inflation Plus 7 Strategy |
| Wealth Personal Superannuation (AMP – MyNorth) | ipac Pathways 30 |
| Wealth Personal Superannuation (AMP – MyNorth) | ipac Pathways 70 |
| Wealth Personal Superannuation (AMP – MyNorth) | ipac Pathways 85 |
| Wealth Personal Superannuation (AMP – MyNorth) | ipac Pathways 95 |
| Wealth Personal Superannuation (AMP – MyNorth) | MyNorth Dynamic Balanced Fund |
| Wealth Personal Superannuation (AMP – MyNorth) | North Guardian Balanced Fund |
| Wealth Personal Superannuation (AMP – MyNorth) | North Guardian Growth Fund |
| Wealth Personal Superannuation (AMP – MyNorth) | North Guardian Moderately Defensive Fund |
| Wealth Personal Superannuation (AMP – MyNorth) | SUMMIT Select Diversified Active – Balanced |
| Wealth Personal Superannuation (AMP – MyNorth) | SUMMIT Select Diversified Active – Growth |
| MLC Superannuation Fund | Access Pre Select Growth |
| MLC Superannuation Fund | MLC MasterKey Unit Trust Horizon 4 – Balanced |
| MLC Superannuation Fund | MLC MasterKey Unit Trust Horizon 5 – Growth |
| MLC Superannuation Fund | MLC Wholesale Diversified Debt Fund |
| MLC Superannuation Fund | MLC Wholesale Horizon 2 Income Portfolio |
| MLC Superannuation Fund | MLC Wholesale Horizon 3 Conservative Growth Portfolio |
| MLC Superannuation Fund | MLC Wholesale Inflation Plus – Assertive Portfolio |
| MLC Superannuation Fund | OnePath Tax Effective Income Trust |
| MLC Superannuation Fund | OnePath Wholesale Balanced Trust |
| MLC Superannuation Fund | OnePath Wholesale High Growth Trust |
| MLC Superannuation Fund | OnePath Wholesale Managed Growth Trust |
| MLC Superannuation Fund | PIC Wholesale 30/70 Portfolio |
| MLC Superannuation Fund | PIC Wholesale 50/50 Portfolio |
| MLC Superannuation Fund | PIC Wholesale 70/30 Portfolio |
| MLC Superannuation Fund | PIC Wholesale Diversified Debt Fund |
| MLC Superannuation Fund | PIC Wholesale Inflation Plus – Assertive Portfolio |
| MLC Superannuation Fund | PIC Wholesale Inflation Plus – Moderate Portfolio |
| Premiumchoice Retirement Service (MLC) | MLC Wholesale Horizon 4 Balanced Portfolio |
| Premiumchoice Retirement Service (MLC) | MLC Wholesale Inflation Plus – Assertive Portfolio |
| Premiumchoice Retirement Service (MLC) | OnePath Tax Effective Income Trust |
| Oasis Superannuation Master Trust (MLC/IOOF) | MLC Wholesale Horizon 1 Bond Portfolio |
| Oasis Superannuation Master Trust (MLC/IOOF) | MLC Wholesale Horizon 2 Income Fund |
| Oasis Superannuation Master Trust (MLC/IOOF) | MLC Wholesale Horizon 4 Balanced Portfolio Fund |
| Oasis Superannuation Master Trust (MLC/IOOF) | OnePath Active Growth Trust (OneAnswer IP) |
| Oasis Superannuation Master Trust (MLC/IOOF) | OnePath Tax Effective Income Trust |
| Oasis Superannuation Master Trust (MLC/IOOF) | OnePath Wholesale Balanced Trust |
| Oasis Superannuation Master Trust (MLC/IOOF) | OnePath Wholesale Capital Stable Trust |
| Oasis Superannuation Master Trust (MLC/IOOF) | OnePath Wholesale High Growth Trust |
| Oasis Superannuation Master Trust (MLC/IOOF) | OnePath Wholesale Managed Growth Trust |
| Oasis Superannuation Master Trust (MLC/IOOF) | Optimix Wholesale Balanced (Class A) |
| Oasis Superannuation Master Trust (MLC/IOOF) | Optimix Wholesale Balanced Trust (Class B) |
| Oasis Superannuation Master Trust (MLC/IOOF) | Optimix Wholesale Growth (Class A) |
| Oasis Superannuation Master Trust (MLC/IOOF) | Optimix Wholesale Growth Trust (Class B) |
| Oasis Superannuation Master Trust (MLC/IOOF) | Optimix Wholesale High Growth Fund (Class A) |
| Oasis Superannuation Master Trust (MLC/IOOF) | Optimix Wholesale High Growth Trust (Class B) |
| Oasis Superannuation Master Trust (MLC/IOOF) | Optimix Wholesale Moderate (Class A) |
| Retirement Portfolio Service (OnePath) | OnePath Tax Effective Income Trust |
| Retirement Portfolio Service (OnePath) | OnePath Wholesale Balanced Trust |
| Retirement Portfolio Service (OnePath) | OnePath Wholesale Capital Stable Trust |
| Retirement Portfolio Service (OnePath) | OnePath Wholesale Managed Growth Trust |
| Retirement Portfolio Service (OnePath) | Optimix Wholesale Balanced Trust (Class B) |
| Retirement Portfolio Service (OnePath) | Optimix Wholesale Growth Trust (Class B) |
| Retirement Portfolio Service (OnePath) | Optimix Wholesale High Growth Trust (Class B) |
Consequences of failing the test
When a product fails the test for the first time, the trustee must write to all members with money in the affected investment option. The wording of this letter is specified in regulation, to prevent funds from attempting to put a positive spin on the message. Essentially, the letter explains the investment option has failed the test and you should consider moving your money to another option or super fund.
The letter will also direct you to use the government’s YourSuper comparison tool to search for a suitable alternative fund – although this tool only compares MySuper options.
For a more comprehensive comparison, including your chosen investment, learn how to compare super funds in seven easy steps.
If a product fails for a second consecutive year it must be closed to new members and existing customers must again be sent a letter explaining the failure. Existing members can keep money in the option, but new investors can’t be added.
The only product currently closed to new members under this rule is AMG Super’s MySuper option, which failed the test for the third consecutive year. Other products that experienced a second consecutive failure last year (Australian Catholic, Energy Industries Super Scheme and BT Retirement Wrap) have all merged with other funds.
Super trustees with failed products are required to assess the implications of failing the test on business operations and consider whether members’ financial interests would be best served by transferring them to another product or fund.
It is evident from the mergers that followed, for all but one of the products that failed for a second time last year, that trustees and the regulator take this obligation seriously. The last remaining product with consecutive failures will close in February 2024, with any remaining member balances to be transferred to the Australian Tax Office (ATO).
Insights into the results
In late November 2023, APRA released an insights paper into the 2023 test results. This provided more detail about underlying patterns of returns and performance, including comparison of outcomes in MySuper and choice products.
APRA’s analysis reveals that the performance test has had a positive impact for consumers in MySuper products, with fees falling and underperforming products leaving the market. Of the 17 MySuper products that have been closed since the first test in 2021, nine had failed the performance test and the others were underperforming their benchmarks, but not by a large enough margin to fail the test. The remaining 58 MySuper products tested in 2023 outperformed their benchmarks by an average of 0.41% per year over the nine-year period leading up to the test, and median administration fees fell from 0.33% in 2021 to 0.26% in 2023.
The news for the choice sector is mixed, with non-platform products comparing quite favourably with MySuper options but platform products coming away bruised.
In the choice platform products that were tested, a total of 56% of member accounts were exposed to underperforming investments. Fees for these products remain persistently high, with the median administration fees sitting at 0.54% – double that of competing non-platform choice and MySuper products. APRA drew attention to the fact that AMG Super (now re-branded to Acclaim Wealth) was responsible for the three products with the highest fees in this category. This is the same platform responsible for the only MySuper product to experience three consecutive failures of the performance test.
In contrast, non-platform choice products had almost identical administration fee levels and competitive investment outcomes when compared with MySuper options. An even smaller proportion of member accounts in these products (16%) experienced returns below benchmark than in the MySuper space (20%). Part of the explanation for the similarity with MySuper is that these products include investment options offered by industry super funds and large retail funds that use the same administration fee structure and investment management processes for all their options – both MySuper and choice.
There were, however, outliers. While the median administration fee for non-platform choice products was 0.27%, APRA called attention to the Tidswell Master Superannuation Plan and Retirement Portfolio Service (ANZ/OnePath funds) for charging fees in the range of 0.8–1.5%. These trustees are on notice to justify or reduce their much higher fees.
What about retirees?
One blind spot in the performance test is that it doesn’t currently apply to any products solely in the retirement (pension) phase. This leads to some lack of transparency over fees and performance for pension account holders.
If your fund has failed investment options in the accumulation phase, it pays to be suspicious of the corresponding pension options, as the underlying investments for options with the same name will be very similar, if not identical.
Xavier O’Halloran, director of Super Consumers Australia (SCA) says: “The bad news is there’s little transparency over retirement products’ fees and performance, and no accountability for funds that poorly manage retirement products. Without this, how can the growing number of Australian retirees be confident that their fund is operating in their best interests?”
SCA is calling on the government to expand an appropriate performance test to all APRA-regulated funds, including retirement products, as a matter of urgency.
What’s the difference between the performance test and APRA heatmaps?
Both the performance test and APRA heatmaps benchmark investment performance but they operate differently.
The performance test assesses only the product’s performance against a tailored benchmark matching its asset allocation. In contrast, the heatmap uses three different benchmarks:
- Net Investment Return (NIR) – comparing performance with the average return of investment options with the same percentage allocation to growth assets. This is used to show how the product is performing against its peers.
- Return relative to Simple Reference Portfolio (SRP) – comparing performance with that of a simple portfolio of index funds created by APRA that has the same percentage allocation to growth assets. This is used to show how the trustee’s asset allocation decisions are impacting returns.
- Return relative to Strategic Asset Allocation benchmark – this is the same benchmark used in the performance test.
The heatmap also separately measures administration fees and total fees for a variety of balance levels. (One of the criticisms of the performance test for choice options is that the administration fee component of the test is based on a $50,000 balance. While this may be appropriate for MySuper products, the average balance in a platform product is $250,000.)
In addition, the heatmap assesses the sustainability of the trustee. The sustainability measure is not about environmental credentials, but rather how much money and how many accounts are moving into or out of the fund. If a fund is losing membership and assets, it could be at risk of not being large enough to remain competitive.
For all these measures, the heatmap displays a colour, with white indicating a satisfactory outcome, through yellow, orange and finally red for the worst results. Consistent with the performance test, the darkest red rating for performance is reserved for options that miss the benchmark by 0.5% or more.
The choice heatmap doesn’t cover platform products at all, while the performance test includes only the platform investment options for which the trustee controls or influences asset allocation.
Trustees use the heatmap as part of their required annual ‘member outcomes assessment’ to help them assess whether the fund is providing value and good investment performance for members.
What to do if you’re in a failed option
If you’re invested in a failed option, it’s time to reassess your super.
If you’re happy with your fund overall, you can consider looking for an alternative investment option in their menu that suits your risk appetite and didn’t fail the test.
If you selected your investment for reasons other than its return potential, such as sustainability factors, you might even be happy to stick with it, although it’s certainly worth comparing with other sustainable options.
Alternatively, you might want to consider moving to an entirely new fund. Many funds offer a free comparison tool via their websites, or you can follow our guide on how to compare super funds.
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