APRA admits some MySuper funds are falling short
The Australian Prudential Regulation Authority (APRA) appears to have backed the claims of industry superannuation funds that not all MySuper products are good enough to be used as default funds.
In a submission which has substantially undermined calls for all eligible MySuper funds to be available to employers as default funds, APRA has told the Productivity Commission (PC) inquiry into alternative default arrangement that the performance of MySuper funds had so far been highly variable.
What is more, the regulator has suggested that the Government may need to legislate both stronger authorisation requirements and a broader member outcomes assessment "with a view to lifting the bar that MySuper products on an ongoing basis.
The APRA submission said that since the introduction of MySuper in July, 2013, there had been considerable variation in net returns and fees for different MySuper products, leading to a wide range of outcomes for members across the different products.
"While there has been some evidence of reductions in fees and costs since MySuper products were introduced, particularly for products with previously very high fee levels, there is clearly room for further improvement," it said.
"Further, while many MySuper products have achieved their net return targets over the past few years, some have fallen well short."
APRA's submission said the current test being applied to MySuper funds (the scale test) was narrowly focused and did not ensure that all of the factors that may affect member outcomes, including insurance, advice and administration services, were considered by superannuation funds when assessing the relative quality of their MySuper product.
"APRA has emphasised to RSE licensees the importance of having a broader ‘member outcomes' focus when undertaking their annual scale test assessment (and also in assessing the ongoing sustainability of their business operations)," it said.
"This requires looking beyond net investment returns to broader qualitative and quantitative outcomes for all members."
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