What do we know about the most recent APRA super performance test, and should I care?
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The Australian Prudential Regulation Authority (APRA) conducts an annual performance test for superannuation products. The results for 2023 are out, and not all the funds tested performed well.
The annual super performance test now covers both default (MySuper) products, and choice (TDP*) investment options - this is the first year choice/TDP options were tested
It’s also important to know that currently, APRA only tests the accumulation investments in your super - for 2023, a total of 869 products were tested
APRA's role
As a prudential regulator. APRA is concerned with maintaining the safety and soundness of financial institutions, so that the community can have confidence that these financial institutions will meet their financial commitments under all reasonable circumstances.
APRA is tasked with protecting the interests of depositors, policyholders and superannuation fund members. (Read the enabling legislation here)
What does the APRA test measure?
The test effectively asks how the actual return (performance) of a fund compares with a benchmark return (considering asset allocation and after fees and taxes). If the actual return is lower than the comparative benchmark by 0.5% per year or more, then this is a fail.**
And the results are…
APRA’s 2023 super performance test found that 96 out of 805 Super/Choice options didn’t meet performance benchmarks
MySuper products were also tested for the third year in a row, with one out of a total of 64 products assessed receiving a fail.
A number of sustainable, ethical and faith-based super products failed the 2023 performance test.
What happens next?
If a fund, or any of its TDP investment options, fails the test, the fund trustee must:
Notify affected members,
Explain what it intends to do to improve its performance, and
If a product fails 2 years in a row, it must be closed to new members.
Why is this an issue?
Are you receiving value for money?
Super Fund performance is important because your fund is there to grow your retirement savings, by investing the money you and your employer put into your super.
If the fund isn’t performing, your retirement savings aren’t growing.
What should you do?
If your fund has notified you about an under-performing fund or investment, you should seek advice about the options available to you, before making any changes to your super investments.
Be aware that any changes may have tax implications.
* TDP: Trustee Directed Products are those which a super fund member chooses to invest in, and is not the default investment option offered by the super fund
** Performance for at least 6 years and a maximum 9 years included in 2023
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