On 15 December 2022, APRA released its annual superannuation fund ‘heat map’ providing detailed information and ranking superannuation funds. At the same time, it issued a ‘Media Release’ (see related TT article). It seems that ‘for profit’ funds and trustees are overly represented in those that are performing poorly. The following is based on an article, by Michael Read, which the Australian Financial Review posted on the same day (see details below). Amongst the parties mentioned, are the following.
- Commonwealth Bank-backed Colonial First State is under pressure to shut or restructure a badly underperforming superannuation product after regulators found it to be among the nation’s worst.
- Colonial First State was one of the four superannuation trustees identified by APRA on Thursday as managing default superannuation products with “significantly poor” performance. The others were:
- Westpac-owned BT,
- scandal-plagued Energy Industries Superannuation Scheme (EISS), and
- Equity Trustees.
- The four trustees collectively administer six underperforming default products that count about 800,000 Australians as members. This includes
- CFS’s FirstChoice product; and
- Commonwealth Essential Super, as well as
- BT Super MySuper and
- a product administered by BT for Westpac staff.
The ‘worst’ default superannuation funds
EISS took out the unenviable title of administering Australia’s worst default superannuation product this year, according to APRA, underperforming its bespoke annual net return benchmark by 1.49 percentage points.
APRA’s superannuation enforcer, Margaret Cole, urged the trustees of the underperforming products to consider directing their members to better alternatives. “APRA expects that trustees with underperforming products will consider options to transfer members or otherwise restructure their businesses, particularly where sustainability pressures are significant,” Ms Cole said. Those ‘restructures’ include the following.
- EISS is working on a merger with Cbus,
- BT will be absorbed into retail fund: Mercer, next year. A spokesman for Mercer said the merger with BT will deliver benefits to most BT members, including meaningful fee reductions.
- Equity Trustees’ AMG MySuper product, has closed to members.
- A spokesman for CFS said the fund had already made significant enhancements to its default offering over the past year, including appointing BlackRock to help manage its investments, appointing a new chief investment officer and lowering fees. “As demonstrated in APRA’s MySuper Heatmap, CFS has among the most competitive superannuation administration fees in the industry. Our low fees and strengthening investment performance will benefit members into the future,” the spokesman said. “Members will also benefit from the $430 million investment we are making to deliver even better products and services to support them to achieve their financial and retirement objectives.”
Just ‘scraped through’
While just five funds failed the performance test in August, the latest data reveal some funds barely scraped through. This includes:
- CFS, which underperformed its performance test benchmark by 0.43 percentage points; and
- ANZ Smart Choice Super, which fell below its benchmark by 0.4 percentage points.
The ‘best’ default superannuation funds
- UniSuper was the top performer, comfortably clearing its annual return benchmark by 1.56 percentage points.
- It was closely followed by:
- an industry fund for meat industry employees; and
- a fund for Goldman Sachs employees.
APRA’s ‘heat map’ – how it works and its effect
The test examined the performance of default superannuation products over eight years. Funds, that delivered returns more than 0.5 percentage points below their net return benchmark, failed. Five funds failed to clear their respective benchmarks this year.
The release of the heat map marks the regulator’s latest effort to shine a light on underperformance in the $3.3 trillion sector, which is proving effective.
- More than one in two superannuation fund members have enjoyed fee reductions over the past year, according to APRA estimates.
- Twenty-eight default products have shut since the prudential regulator released its first heatmap in 2019, shifting $52 billion in retirement savings to better funds.
Ms Cole said the heat maps had been an important tool for eradicating unacceptable product performance, improving transparency across the superannuation industry and holding trustees to account for the outcomes being delivered to members. “Since its introduction, we have seen costs to members reduced, many underperforming products closed, and a drop in the number of members in funds with significantly poor investment performance,” Ms Cole said. “However, there are still hundreds of thousands of members in funds with sub-par investment performance, and the industry has serious sustainability issues to address.
Michael Read reports from the federal press gallery at Parliament House. He writes on financial services, politics and health. He was previously an economist at the Reserve Bank of Australia and at UBS. Connect with Michael on Twitter. Email Michael at michael.read@afr.com.au
Default superannuation funds
Ordered from worst to best
1 | Energy Industries Superannuation Scheme-Pool A | Balanced (MySuper) |
−1.49%
|
$3.6B | 16,904 |
---|---|---|---|---|---|
2 | Retirement Wrap | BT Super MySuper |
−1.02%
|
$81.9B | 782,187 |
3 | Australian Catholic Superannuation and Retirement Fund | LifetimeOne |
−0.79%
|
$10.2B | 84,623 |
4 | Retirement Wrap | Westpac Group Plan MySuper |
−0.73%
|
$81.9B | 782,187 |
5 | AMG Super | AMG MySuper |
−0.67%
|
$1.6B | 14,955 |
6 | AvSuper Fund | AvSuper Growth (MySuper) |
−0.47%
|
$2.4B | 5,860 |
7 | Colonial First State FirstChoice Superannuation Trust | FirstChoice Employer Super |
−0.43%
|
$83.0B | 671,134 |
8 | Commonwealth Essential Super | Essential Super |
−0.42%
|
$3.8B | 131,125 |
9 | Retirement Portfolio Service | ANZ Smart Choice Super for employers and their employees |
−0.40%
|
$33.7B | 719,569 |
10 | Retirement Portfolio Service | ANZ Smart Choice Super for QBE Management Services Pty Ltd and their employees |
−0.37%
|
$33.7B | 719,569 |
11 | Mine Superannuation Fund | Default Lifecycle |
−0.35%
|
$12.8B | 58,538 |
12 | Russell Investments Master Trust | GoalTracker |
−0.34%
|
$9.5B | 73,453 |
13 | Building Unions Superannuation Scheme (Queensland) | BUSSQ MySuper |
−0.33%
|
$5.6B | 69,617 |
14 | OneSuper | MySuper Passive Balanced |
−0.31%
|
$1.2B | 59,814 |
15 | Mercer Super Trust | Mercer SmartPath |
−0.26%
|
$27.5B | 295,856 |
16 | Retail Employees Superannuation Trust | REST Super |
−0.23%
|
$67.2B | 1,923,357 |
17 | Guild Retirement Fund | Guild Retirement Fund (MySuper) |
−0.22%
|
$2.4B | 86,520 |
18 | TWU Superannuation Fund | Balanced (MySuper) |
−0.20%
|
$6.2B | 98,929 |
19 | LGIAsuper | LGIASuper MySuper |
−0.17%
|
$32.5B | 128,390 |
20 | AMP Super Fund | AMP MySuper No.3 |
−0.13%
|
$55.8B | 743,911 |
21 | Commonwealth Bank Group Super | Accumulate Plus Balanced |
−0.09%
|
$12.4B | 67,734 |
---|---|---|---|---|---|
22 | Commonwealth Essential Super | Essential Super |
−0.42%
|
$3.8B | 131,125 |
23 | CONSTRUCTION AND BUILDING UNIONS SUPERANNUATION FUND | Growth (Cbus MySuper) |
0.78%
|
$72.6B | 870,111 |
24 | Energy Industries Superannuation Scheme-Pool A | Balanced (MySuper) |
−1.49%
|
$3.6B | 16,904 |
25 | equipsuper | MyCatholicSuper |
−0.05%
|
$44.7B | 150,117 |
26 | equipsuper | Equipsuper MySuper |
0.61%
|
$44.7B | 150,117 |
27 | First Super | First Super MySuper |
1.21%
|
$3.7B | 47,087 |
28 | Goldman Sachs & JBWere Superannuation Fund | Goldman Sachs & JBWere Superannuation Fund_MySuper Product |
1.38%
|
$617.9M | 1,813 |
29 | Guild Retirement Fund | Guild Retirement Fund (MySuper) |
−0.22%
|
$2.4B | 86,520 |
30 | HESTA | HESTA MySuper |
0.44%
|
$67.4B | 968,215 |
31 | HOSTPLUS Superannuation Fund | Balanced option |
1.32%
|
$82.5B | 1,596,951 |
32 | IOOF Portfolio Service Superannuation Fund | IOOF MySuper |
0.35%
|
$31.7B | 215,833 |
33 | legalsuper | MySuper Balanced |
0.46%
|
$5.1B | 41,493 |
34 | LGIAsuper | LGIASuper MySuper |
−0.17%
|
$32.5B | 128,390 |
35 | Local Authorities Superannuation Fund | Vision MySuper |
0.44%
|
$16.2B | 83,741 |
36 | Local Government Super | Active Super Lifestage Product |
0.22%
|
$13.6B | 86,844 |
37 | Lutheran Super | Balanced Option_MySuper Compliant |
0.27%
|
$757.4M | 5,812 |
38 | Maritime Super | MYSUPER INVESTMENT OPTION |
−0.11%
|
$5.9B | 22,692 |
39 | Meat Industry Employees Superannuation Fund | MIESF MySuper |
1.54%
|
$955.0M | 16,247 |
40 | Mercer Super Trust | Mercer SmartPath |
−0.26%
|
$27.5B | 295,856 |
[Tax Month – January 2023, previous month, 11.1.23]