Four MySuper products failed the performance test for the second time and the affected funds will not be allowed to take on any new members. A fifth product Retirement Wrap’s Westpac Group Plan MySuper – failed the test for the first time, resulting in the trustees having to inform members of the outcome.

Some thirteen funds failed the test last year and since then, 11 of those have either merged with another fund or announced plans to do so.

“Fewer funds failing the test is a good outcome, with a number of last year’s failing funds producing some of the best returns this year as markets downturned,” said David Carruthers, principal consultant at Frontier.

“However, it would be naïve to think a fund’s failure last year led to their improved performance this year. It is a reflection that last year’s failed funds may not have been bad funds in the first place.”

The products that failed the latest test are Australian Catholic Superannuation and Retirement Fund’s LifetimeOne, Energy Industries Superannuation Scheme-Pool A’s Balanced (MySuper), Retirement Wrap’s BT Super MySuper and AMG Super’s AMG MySuper announced APRA on Wednesday. The failed products hold $24.6 billion of assets for 559,000 members.

The trustees of three of these four products are planning to exit the industry and transfer affected members to new MySuper products.

Under review

APRA assessed 69 MySuper products with at least five years of performance history against a benchmark that assesses investment performance, fees and costs.

The use of these benchmarks has resulted in a chorus of opposition in the industry in relation to the design of the performance test, its effectiveness and the unintended consequences. One of the main issues of the test is the constraints funds have from maximising member outcomes as it shortens the investment horizon.

Minister of financial services Stephen Jones previously announced Treasury will be conducting a review of the Your Future, Your Super reforms, particularly the performance test, a move that has been welcomed across the industry.

“This result is a great case study demonstrating that what gets measured gets managed, particularly when the consequences of failure are severe. The question mark is how well the performance test aligns with member outcomes,” said David Bell, executive director at The Conexus Institute.

“The announced YFYS review is a good opportunity to better align the performance test, which will undoubtedly drive industry activity, with member outcomes.”

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