APRA’s performance test sees 96 trustee directed products fail

The Australian Prudential Regulation Authority (APRA) has announced 96 trustee directed products and one MySuper product failed to meet the benchmark of its 2023 superannuation performance test. 

This year’s test had been expanded to include the performance of 805 trustee directed products, a subset of the choice sector. 

Some 96 trustee directed products failed to meet the test benchmarks, which included 20 of 500 non-platform products and 76 of 305 platform products.

Three-quarters of the failed trustee directed products were concentrated in products offered by only four trustees: N. M. Superannuation Proprietary Limited, Nulis Nominees (Australia) Limited, Oasis Fund Management Limited, and OnePath Custodians Pty Limited.

In addition, one MySuper product, AMG Super, failed to meet the test benchmarks out of the 64 MySuper products assessed, compared to the five which failed in the previous year. 

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This was the third consecutive year that the product failed and has been closed to new members since 2022. It was terminated by Acclaim Wealth and Equity Trustees on 25 August which was announced to existing members. 

There were some 20 non-platform products that failed, including Australian Retirement Trust’s QSuper Socially Responsible, three products from Crescent Wealth, five products from OneSuper, and three from ClearView Retirement Plan. 

Platform trustee directed products saw the highest median administration fees and costs at 0.54 per cent of assets, compared to 0.27 per cent for non-platform trustee directed products and 0.26 per cent for MySuper products.

Margaret Cole, deputy chair at APRA, commented that the expanded scope of this year’s test has “significantly enhanced transparency” across the wider range of super products.

“The annual performance test remains a powerful tool to help APRA hold trustees to account for product performance, fees and costs,” she said.

“Since its introduction in 2021, nine underperforming MySuper products have exited the market and a total of 800,000 members, with combined assets of $39 billion, have moved to better performing products.”

Trustees of products which failed to pass the benchmarks must notify their members of the test outcomes by 28 September 2023. Trustees are not allowed to accept new members into products that have failed for two consecutive years.

Cole added that examining choice product performance was more nuanced than for default MySuper products. 

“Members in trustee directed products make active decisions about their investment options and some might select products for reasons beyond performance. 

“Nevertheless, all trustees must take responsibility for the products they make available and ensure the products they offer are in their members’ best financial interests.”

Moreover, she acknowledged that some trustees with multiple failed products have rationalisation programs underway to improve member outcomes. 

“APRA expects heightened focus on these underperforming products and will be monitoring the progress of product consolidation programs closely,” Cole continued.