All but one ‘failed’ super fund had already moved

The reality of the latest superannuation fund performance test is that all but one of the products deemed to have failed are, in any case, the subject of mergers.

The Australian Catholic Superannuation Fund is in the process of merging with UniSuper, the BT products are covered by the transfer of the BT Superannuation business to Mercer and EISS Super is expected to shortly formally announce that it is merging with big construction industry fund, Cbus.

That leaves only AMG Super to deal with the consequences of a double failure.

Worth mentioning, too, is the fact that the Colonial First State (CFS) product which failed last year’s inaugural performance test has managed to get itself on the right side of the ledger by passing the 2022 performance test.

Commenting on the fund’s recovery, CFS Superannuation chief executive, Kelly Power said: “We’re delighted that Colonial First State’s MySuper products have passed the Your Future, Your Super performance test. This outcome follows a number of key changes to continue delivering better performance for members including the appointment of BlackRock to strengthen our investment capability, reductions in fees and the recent appointment of Jonathan Armitage as Chief Investment Officer”.

“Today’s outcome demonstrates our commitment to becoming one of Australia’s leading super and investment providers, with our members set to benefit from more than $430m being invested over the next four years to deliver better products and services.”

“We have been consistently reducing our fees over the past three years with more than 770,000 members benefiting from aggregate savings of more than $235 million per year during that time. On a total fee basis, which includes investment and administration fees, our MySuper products are in the top quartile of funds and offer amongst the lowest fees in the market, according to Chant West.”

The consequences for those funds which have failed the performance test for a second time is that, unless a successor fund transfer is already underway due to a merger, they must now ensure the affected produce is closed to new members.

The double-failed funds must also return any contributions to new members if those contributions were received after 31 August.

The bottom line of this latest performance test exercise is that it only picked up one fund which had not already failed the 2021 test – the Westpac Group Plan MySuper product.

BT Super and Mercer announced their merger transaction in May giving rise to the creation of the Mercer Trust.

The number of failed funds identified in the latest performance test is less than half the 13 funds identified in the inaugural 2021 test, and well down on predictions that as many as 10 funds might fail in 2022.

The 2022 performance test may be the last one performed under the existing methodology, with the Assistant Treasurer and Minister for Financial Services, Stephen Jones having ordered a Treasury review and an examination of any unintended consequences.

At the same time, Treasury is currently receiving submissions with respect to the treatment of faith-based products within the performance test, with draft legislation suggesting they should be subject to a supplementary test entailing different criteria.

In announcing the Treasury review of the performance test, Jones said any extension beyond MySuper products would be delayed for 12 months and noted that beyond unintended consequences the Government was conscious of the manner in which “unnecessary regulatory measures can impose a significant administration cost on funds and their members”.