MySuper performance test scores to be revealed Loading 3rd party ad content Loading 3rd party ad content Loading 3rd party ad content Loading 3rd party ad content

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By John Collett

The results of the Australian Prudential Regulation Authority’s (APRA) new superannuation fund performance test, released a fortnight ago, graded MySuper funds as either a “pass” or “fail”, but did not include the actual test scores.

However, APRA executive board member Margaret Cole has confirmed that the regulator would likely make the scores fully available to the public by the end of the year, when it publishes the next version of its fund Heatmaps.

APRA says more details beyond simply whether a super fund passed or failed its inaugural performance test will likely be released later this year

APRA says more details beyond simply whether a super fund passed or failed its inaugural performance test will likely be released later this yearCredit:Simon Letch

Thirteen out of the 80 MySuper investment options that failed the test have up to one million members between them and a combined $56 billion in retirement savings.

However, there must be some other funds – perhaps accounting for another one million members – that passed the test by only the skin of their teeth.

Appearing before the House of Representatives Standing Committee on Economics last week, Cole was asked why APRA had not published the full test scores for MySuper funds.

She said the regulator decided to publish only if a fund had passed or failed the test, as it provides a “very clear message to the consumers of the products”.

When asked if APRA would publish the actual scores, Cole said: “I think it is our intention...to publish the sort of information that you are talking about, and we will bring that together with our next publication of the Heatmap, later this year, so that information [will be] there”.

APRA has been publishing its Heatmaps annually since 2019.

While they are specifically tailored for those with the financial skills to interpret their often-complex information, the Heatmaps provide much information on how funds are performing. However, they are basically of no use to the person in the street.

Consumers can go to the YourSuper comparison tool, administered by the ATO, and see how their MySuper fund option compares to its peers.

While the information provided is relatively straightforward for single balanced options, it is much harder to work out if a “life stage” type of MySuper option is any good.

Life stage, or lifecycle options, are where fund members are placed into a particular option depending on the decade they were born. The options often go by names of birth decades – for example, 1960s, 1970s, 1980s.

The investment risk is changed automatically to be more conservative for fund members as they age.

With traditional balanced options that are favoured by most industry super funds as their default MySuper offerings, the asset allocation changes little. And, whether someone is aged 25 or 55, if they are in their fund’s balanced default MySuper offering, they receive identical returns.

The changing asset allocation of life stage options makes it more complicated for these fund members to work out if they are in a poor performing fund or not, and is where APRA’s performance test is particularly valuable.

Members who are in their fund’s MySuper option that failed the APRA test will receive a standardised letter from their fund by September 27, telling them their fund has failed. The letter directs the member to the YourSuper comparison site to look for a better fund.

The MySuper tests will be conducted annually and funds that fall short of their benchmarks for two years in a row will no longer be able to take new members into the failing investment option.

It is likely that most of the funds that failed this time around will fail again in 12 months.

The investment performance is measured for a period of between five years and a maximum of eight years. That means the outcome of the test in the past 12 months has already been largely baked-in to the fund’s longer-term performance, leaving it with few options to correct the situation.

For those that failed by only a little, they could reduce their fees or seek to improve their investment performance. However, those that failed by a substantial amount may have little choice but to seek out a merger partner from among better-performing funds.

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