For the first time since the introduction of Your Future Your Super in 2021, no MySuper product has failed the annual performance test.
The 2024 test applied to a total of 15.7 million member accounts and $1.1 trillion in assets, representing all accumulation members who are invested in 57 MySuper products.
A total of 590 trustee-directed products (TDP) were also assessed, consisting of 398 non-platform products and 192 platform products. No non-platform TPD products failed the performance test this year.
Chant West general manager Ian Fryer said it was unsurprising that there weren’t any fails in non-platform TDPs because those that passed last year “managed towards the test” to maintain that status, and almost all of the options that failed the 2023 trustee-directed test have since been closed.
He noted the number of non-platform TDP assessed has fallen from circa 500 in 2023 to 398 in 2024.
Ten platform TPD products failed the test for the first time, and 27 clocked up a repeat failure and will be closed to new members.
Almost all – 36 out of 37 – of the failed products were offered by NM Superannuation (trustee of AMP Super and its Wealth Personal Superannuation and Pension Fund); and one offered by IOOF Investment Management also failed.
However, despite the improved pass rate, there are urgent questions about the relevance of the test in its current form and whether it is leading to better or poorer member outcomes.
The 2024 test results come after Treasury opened a public consultation on the performance test design options in March.
The consultation canvassed the potential of adopting an alternative single metric framework (such as one peer benchmarked) or a multi-metric (such as one similar to the APRA heatmap) framework, alongside the option of maintaining the status quo. The Treasury has yet to provide a response to the 65 submissions.
The Conexus Institute* warned in April that if the government decided to keep the current form of test in place, it is unlikely that any MySuper product would again fail the test given funds have learnt to actively manage the test. The FY24 results provided a glimpse into that future.
Chant West’s Fryer said the latest YFYS results are strong evidence that something has got to change to make the performance test more enduring.
“I think it can be argued that the performance test has fulfilled an important role of removing some underperforming products, although it also removed some products that we would argue were doing OK but the nature of the test disadvantaged them,” he told Investment Magazine.
“At an overall system level, that is probably a good thing, even though some decent funds needed to close.”
He urged Treasury to consider some of the other design options that surfaced during consultation. Chant West is advocating for a multi-metric approach that introduces one or two additional metrics (performance relative to simple reference portfolio, peer-relative test, or both) to complement the current YFYS.
“Ideally, we need a test that provides incentives to focus on what really matters to members – which is delivering strong performance to members for a given level of risk.
“Minister Jones has indicated that he is keen to move to a more enduring test. One that focusses on risk-adjusted returns would be much better than what we have now and should lead to better long-term member outcomes.”
However, some super funds including Cbus and Vanguard Super have advocated for maintaining the current test system.
APRA deputy chair Margaret Cole said there is still room for improvement among funds even if the current YFYS regime were to continue.
“These are pleasing results but, as trustees well know, past performance is no guarantee of future success,” Cole said in a media statement.
“Even based on existing performance, there is significant scope for improvement across key drivers of performance, including costs and fees, and investment returns.”
Meanwhile, member-advocate group Super Consumers Australia is calling for YFYS to be extended to account-based pensions, which it said covers 1.3 million retiree accounts and $451 billion in assets. The nation’s largest super fund, AustralianSuper, made the same recommendation in its performance test submission.
“APRA has been sitting on this data for several years while retirees languish in accounts serving up high fees and poor performance,” said Super Consumers Australia director Xavier O’Halloran.
“We are calling on APRA to release the data before the end of the year so that Australian retirees can avoid poor performing super products.”
* The Conexus Institute is a not-for-profit think-tank philanthropically funded by Conexus Financial, publisher of Investment Magazine.
