Thirteen superannuation funds have failed the government’s performance test aimed at naming and shaming under performers.
The failed funds included Commonwealth Bank Group Super, Westpac’s BT Super Fund and Christian Super’s MyEthical Super.
This means that 1.1 million Australians have around $56.2 billion invested in underperforming superannuation funds.
It is an astonishing turn of events in corporate Australia. And amazingly, the Australian Securities and Investment Commission took it upon itself to warn the funds not to lie to members about what had happened.
ASIC warned potential underperformers against customising a letter they are forced to send to members, or send a separate communication that misrepresented their performance.
‘‘ The text of the letter you send to beneficiaries is mandatory – don’t change it,’’ said the note from ASIC senior executive leader for superannuation Jane Eccleston.
‘‘ Any communication you make in relation to the [annual performance assessment] or about your performance should provide information in a balanced and factual way that is not misleading and/or deceptive.’’
The Australian Prudential Regulation Authority (APRA) released its results after analysing 76 MySuper funds and judged them against the benchmark for Your Future, Your Super reforms and found 13 have underperformed.
The 13 failed funds now have four weeks to send a letter to members informing them of the result and suggesting they switch funds.
The letter will say: “Your superannuation product has performed poorly under an annual performance test that was introduced by the Australian Government to make sure Australians are getting the most out of their super.
“As a result, we are required to write to you and suggest that you consider moving your money into a different superannuation product.
“Switching to a different super product is easy, and there are no fees involved.”
APRA’s executive board member Margaret Cole said that while it was “welcome news” that 84 per cent of the funds had passed, it remains “concerned” about those that have failed.
She added that APRA has put the failed funds on notice and they now have an importance choice to make.
“They can urgently make the improvements needed to ensure they pass next year’s test or start planning to transfer their members to a fund that can deliver better outcomes for them.
“APRA has intensified its supervision of trustees with products that failed the test and has requested they provide a report identifying the causes of their underperformance and how they plans to address them,” said Ms Cole.
Funds that fail two years in a row will be banned from accepting new members.
Superannuation Minister Jane Hume who led the government’s superannuation reform agenda said: “ Today is a big day for super fund members and Australia’s future retirees. The government is hauling performance out of the darkness into the light – and the bright sunlight of accountability will be an uncomfortable reality for some.”
There were big names among the funds – including the Commonwealth Bank, Colonial First State and others. Remember, these super funds not only under performed, but many also claimed high fees. So they paid themselves to underperform, knowing their members would probably not find out until it was too late.
The big question: will members now beat a path to the exit and find funds that are doing better.
They certainly should.
Meanwhile, we’re grateful to the Australian Financial Review and APRA for the 13 best performers: