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Thirteen superannuation funds, including two associated with the Commonwealth Bank, that collectively hold the retirement savings of 1 million Australians have failed a new performance test, Australian Prudential Regulation Authority data released on Tuesday morning shows.
The funds, which manage $56bn in assets, will now have to write to their members informing them of the underperformance and inviting them to use an online super comparison tool run by the Australian Taxation Office.
Among the big funds to fail the test are the FirstChoice Employer Super fund run by CBA subsidiary Colonial First State, which has funds under management of $10.5bn and more than 230,000 members, and the MySuper product offered by big financial services group BT, which has $17.2bn under management on behalf of more than 540,000 members.
The CFS superannuation chief executive, Kelly Power, said the fund “narrowly missed” the Apra benchmark and was in the process of cutting its fees.
“We are reinvesting to ensure CFS emerges as one of the most competitive superannuation and investments businesses in Australia with membership retirement outcomes at the heart of everything we do,” she said.
BT’s managing director of superannuation, Melinda Howes, said the fund’s trustee “has worked hard and invested heavily to improve member outcomes and we are seeing the results of this in our recent performance”.
CBA’s staff super fund, Commonwealth Bank Group Super, which is jointly run by the bank’s management and staff and manages more than $12bn for 72,500 members, also failed.
A spokesperson for the fund said this was “due to a number of underlying factors including some differences in the investments we hold compared to the benchmark asset classes they are measured against and underperformance of some of our investments”.
Also failing the test was a smaller fund run by Westpac, Asgard Employee MySuper, which has about $2.8bn under management on behalf of almost 74,000 members.
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By dollar value and member numbers, retail funds, which banks and other financial institutions run for profit, dominated the list of funds flunking the test.
However, several industry funds, which are jointly run by unions and employers for the sole benefit of members, also failed.
The biggest was LUCRF, which manages $7.4bn on behalf of 132,000 members.
It will no longer be allowed to use the branding of peak body Industry Super Australia, which on Tuesday announced that only funds that meet the test will be allowed to take part in its campaigns, which includes the cupped hands logo and “compare the pair” advertising.
The fund is set to disappear, as it is in the process of merging with Australia’s biggest super fund, the $225bn AustralianSuper.
Maritime Super, which is jointly run by employers and the Maritime Union of Australia, quit ISA on Friday and outed itself as failing the test on Monday.
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The fund, which manages more than $5.4bn on behalf of more than 24,500 members, said the test focused too much on past performance and did not capture recent changes that would improve member returns.
It has agreed to pool its investments with hospitality industry fund Hostplus – a move that stops short of Apra’s preferred option for underperforming funds, which is a full merger.
The Energy Industries Superannuation Scheme, an industry fund which has $5.6bn under management for more than 21,000 members, also failed. It is in talks to merge with the similarly sized TWUSuper.
Other small funds to fail the test include aviation industry fund AvSuper, Catholic Super’s LifetimeOne product, Christian Super’s My Ethical Super and the Victorian Independent Schools Superannuation Fund.
The test is part of the Your Future, Your Super package of changes to the superannuation industry introduced by the treasurer, Josh Frydenberg, and are designed to weed out poor performers over time.
Apra’s assessment focused on MySuper products, which are supposed to be low-cost funds for people who don’t choose a fund when they start a new job.
There are 80 MySuper funds but Apra only assessed the 76 that have at least five years of performance history.
Investment performance over the past eight years, or five if that was all that was available, was assessed against a benchmark.
Management fees were also included – although in a last-minute change only the most recent year’s fee counted, which may have spared some funds from disclosing their historic underperformance.
Funds that fail the test twice in a row will be banned from accepting new members.
“Trustees of the 13 products that failed the test now face an important choice: 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,” the Apra executive member Margaret Cole said.
“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 plan to address them,” she said.
“Trustees have to monitor their products closely and report important information to Apra – including relating to the movement of members and outflow of funds.”
AMG Super – AMG MySuper
ASGARD Independence Plan Division Two – ASGARD Employee MySuper
Australian Catholic Superannuation and Retirement Fund – LifetimeOne
AvSuper Fund – AvSuper Growth (MySuper)
BOC Gases Superannuation Fund – BOC MySuper
Christian Super – My Ethical Super
Colonial First State FirstChoice Superannuation Trust
Commonwealth Bank Group Super – Accumulate Plus Balanced
Energy Industries Superannuation Scheme Pool A – Balanced (MySuper)
Labour Union Co-Operative Retirement Fund – MySuper Balanced
Maritime Super – MYSUPER INVESTMENT OPTION
Retirement Wrap – BT Super MySuper
The Victorian Independent Schools Superannuation Fund - VISSF Balanced Option (MySuper Product)