Many in retirement are travelling comfortably, with three key factors contributing to their happiness – good physical and mental health and enough money to enjoy life.
Perhaps the assumption that markets are still anchored by predictable economic policies needs to be challenged. For the first time since the fall of the Berlin Wall, political volatility – once background noise – is potentially reshaping investment risk at a structural level.
Are you one of the million people holding a dud fund?
As part of the Government’s ‘Your Future, Your Super’ (YFYS) reforms, all APRA regulated super funds will be submitted to a performance test on a yearly basis. The test has been derided by the industry but ultimately forces every fund to measure itself against the index or ‘average’ fund. Where is persistently underperforms it will be forced to contact members and if this continues, ultimately stop accepting new members.
On APRA’s first run, thirteen MySuper products have failed the APRA performance test.
What that means is that one million Australians are tied to underperforming default super funds. The funds will be forced to send a letter to the 1.1m members by the end of September encouraging them switch to a better fund.
In total, APRA looked at 76 MySuper products and assessed them against 5 years of performance history against a benchmark. They were graded as a ‘Pass’ or ‘Fail’. Some of the largest funds that did not pass are included in this list:
These include:
- AMG MySuper
- Commonwealth Bank Group Super
- Energy Industries Superannuation Scheme-Pool
- Colonial First State FirstChoice Superannuation Trust
- Labour Union Co-Operative Retirement Fund
- Maritime Super
- BT Super’s Retirement Wrap
- ASGARD Independence Plan Division Two
- Australian Catholic Superannuation and Retirement Fund
- The Victorian Independent Schools Superannuation Fund
- Boc Gases Superannuation Fund
- AvSuper Fund
- Christian Super
On the other hand +80 per cent of default super funds passed the test with flying colours. The top 10 performers by net return, assume a 30 year old with a $50k balance were:
- Active Super 9.46%
- AustralianSuper 9.44%
- HOSTPLUS Superannuation Fund%
- AON Master Trust 9.14%
- Goldman Sachs & JBWere Superannuation Fund 9.13%
- Unisuper 9.01%
- Construction and Building Unions Superannuation Fund 9%
- Mine Superannuation Fund 8.86%
- QSuper Lifetime 8.8%
- Retirement Wrap Westpac Group 8.75%
Trustees of the failed products have an important choice of either making the improvements required to pass next year’s test or to transfer members funds to a fund that can deliver better return. APRA has also requested that these managed funds provide a report identifying the causes of their underperformance and how they plan to address them.
The flipside to this coin, is this test doesn’t take into account risk, lifecycle, or environmental, social and governance (ESG) screening considerations. Good products such as a value-based fund, may fail this test because of their investment style life cycle.
Trustees of failed products are required to write to members by 27 September 2021.
