APRA

The value of Australian’s superannuation pool rose to a record high of $3.62 trillion in the June quarter, a highlight of the managed funds industry’s surging overall performance over the past year as rising rates and rebounding markets improved asset values.

Super funds are failing in their primary duty of understanding customers’ retirement income needs and aren’t doing enough to address known data gaps, the regulators said, criticising their slow progress under the retirement income covenant.

With new data showing offshore share investments comprise just 2 percent of total self-managed superannuation fund assets in Australia, advisers are warning SMSFs against overreliance on domestic shares and cash and urging diversification.

The regulator found 45 per cent of Choice super options underperformed the heatmap benchmarks in 2022, while one in five underperformed significantly. It also put trustees on notice that it’s stepping up scrutiny of poorly performing Choice products.

Treasury’s plan would increase the headline tax rate to 30 per cent from 15 per cent for earnings on superannuation balances above $3 million. The SMSF Association and others have called it unsustainable and discriminatory to SMSFs.

The prudential regulator will more closely examine the valuation methodologies super funds deploy to value private assets to address an emerging gap between the performance of listed and unlisted property.

The federal government is seeking feedback on proposed changes to rules aimed at preventing non-arm’s-length transactions by superannuation funds, in a bid to address concern that SMSFs and smaller funds that breach the provisions could be disproportionately penalised.

Superannuation funds are more commonly offering ‘lifecycle’ investment options that adjust with a saver’s age. But a recent paper by the superannuation regulator highlights that some of these funds aren’t sticking to their mandates.

Australians should be putting more money into superannuation and diversifying out of property, some say, even as super performance remains a question mark.

Funds have adapted to the test’s metrics, but the consequent risk aversion could put the industry in “limp mode” and curb performance.