The latest superannuation performance test results have been released by APRA, highlighting improvements but also flagging significant underperformance in trustee-directed products. Out of 563 products assessed, all MySuper products and most non-platform trustee-directed products passed the test for the year. However, seven platform trustee-directed products failed, indicating a decrease from the previous year’s failures. APRA noted concerns about the reliance on rebates to pass the test, emphasizing the need for sustained performance improvement.
Despite offering broader investment options, over 40% of trustee-directed products on platforms showed notable underperformance over a 10-year period. Noteworthy among the trustees responsible for the failed products were N.M. Superannuation Proprietary Limited, I.O.O.F. Investment Management Limited, and Bendigo Superannuation Proprietary Limited. In response to one failed product, Insignia Financial highlighted its overall strong investment performance and the closure of the underperforming product earlier.
Following a three-day roundtable event, Treasurer Jim Chalmers announced a review of the superannuation performance test to ensure it does not hinder institutional investors like super funds from exploring diverse investment avenues such as housing. This move has been positively received by industry associations, with ASFA CEO Mary Delahunty emphasizing the importance of performance metrics in guiding member decisions and addressing underperformance within the system.
On the other hand, AMP raised concerns about the test’s application to investment products on superannuation wrap platforms, particularly after four of its products failed. AMP’s criticism centered on the test’s limited coverage and potential adverse impacts on members, urging for urgent reform to avoid misleading outcomes and unnecessary regulatory burdens on advisers.
Legal expert Luke Barrett questioned the efficacy of the performance test, noting the absence of failures among MySuper and non-platform trustee-directed products for two consecutive years. This trend raises questions about the test’s relevance in a landscape where performance standards seem to have universally improved. Barrett’s reflections underscore the ongoing debate around the test’s methodology and its ability to address industry challenges effectively.
As the superannuation sector navigates evolving regulatory landscapes and market dynamics, the need for robust performance evaluation mechanisms remains critical. The performance test serves as a key tool in safeguarding members’ interests and ensuring fund trustees deliver competitive returns. The ongoing dialogue among regulators, industry players, and experts will be instrumental in refining these evaluation frameworks to adapt to changing market conditions and investor expectations.
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