The Albanese Government will ensure that all superannuation trustees are held to account for the performance of their funds.
The performance test administered by the Australian Prudential Regulation Authority has been effective at shining a light on underperformance in the MySuper sector.
The Albanese Government is updating the benchmarks used to measure fund performance and extending the scrutiny to many more products in the Choice sector where we know there is significant underperformance.
APRA’s recent Superannuation Choice Heatmap found one in five choice investment options had significantly poor performance over eight years. Around 30 per cent of products had significantly high administration fees.
The insights highlight that many members are at risk of poor retirement outcomes. Subjecting more superannuation products to performance testing means members can see how their fund is comparing to others. It also means members will be individually notified if their fund is underperforming.
Following consultation on draft regulations and the Your Future, Your Super review, the Government will update the regulations for the August 2023 performance test.
The updated test will address unintended consequences identified in the Your Future, Your Super review, while ensuring it is more fit‑for‑purpose for Choice products. The changes include:
- The minimum testing period will be increased in line with the increase of the longer-term investment testing ‘lookback’ period.
- Key benchmarks will be calibrated to ensure that funds are not unintentionally discouraged from investing in certain assets.
- In assessing the RAFE (representative administration fee) for trustee-directed products (TDPs), platform and non-platform products will be benchmarked against a median fee relevant to this category.
The Government will continue to explore and consult on further changes that improve the sophistication of the test to scrutinise underperformance across superannuation products.
Further details of the performance test updates can be found below.
| Category | Updates |
|---|---|
| Platform Products |
The representative administration fees and expenses (RAFE) for platform trustee-directed products (TDPs) will be tested against the median RAFE of other platform TDPs to compare a similar level of service. The investment performance of platform TDPs will also be tested using gross of tax variables to reflect how these products operate and report to APRA. The RAFE of non-platform TDPs will be tested against the median RAFE of other non-platform TDPs. An option that is offered both through a platform and through a master trust (Hybrid platform TDP) will be tested twice, once as a platform TDP and once as a non-platform TDP with the worst result taken. |
| Minimum Testing Period | The minimum testing period will be progressively increased for all products from five to seven years to align with the increase in the lookback period from eight to ten years. |
| Notification Letter | The text in the notification letter sent to members in failing Choice products will be adjusted to flag cost considerations for certain members, taking into account the nature of different TDPs. |
| Benchmarks | Further refinements will be made to the indices that were proposed in the exposure draft regulations (outlined below). |
| Asset Class | Index Update |
| Australian Fixed Income | Retain the Bloomberg Ausbond Composite 0+ Yr Index |
| International Credit | Change to the Bloomberg Global Aggregate Corporate Index (hedged AUD) |
| Australian and International Listed Infrastructure | Change to the FTSE Developed Core Infrastructure 50/50 100% Hedged to AUD Net Tax (Super) Index |