APRA notes 3 super funds open to a second performance test fail

Three superannuation products remain from the 13 deemed to have failed the MySuper performance test and the Australian Prudential Regulation Authority (APRA) says it has worked closely with them to ensure they know what happens if they fail for a second time this month.

The three superannuation funds in question are those which have chosen not to merge or otherwise enter into successor fund transfer arrangements and among the funds to not formally declare merger or change activity are Colonial First State FirstChoice Superannuation Trust, FirstChoice Employer Super, Energy Industries Superannuation Scheme Balanced (MySuper) and BT Super MySuper.

However, the BT superannuation business has been acquired by Mercer and EISS Super has been widely regarded as likely to merge with big construction industry fund, Cbus.

APRA member, Margaret Cole has publicly canvassed the prospect of funds failing for a second time and therefore having to close to new members.

Addressing the Financial Services Council (FSC), Cole noted the funds which had failed last year’s first performance test and which had reacted accordingly.

“We have engaged closely over the past year with the trustees of those three remaining products to ensure they are prepared to comply with that requirement should it be necessary,” she said.

“Trustees are also required to meet their obligation to inform members of their test failure. We will be closely monitoring those products required to close to new members through a targeted data collection to ensure trustees are meeting these requirements of the law.”

“Inevitably there will also be products that fail the test for first time. In those cases, trustees will also need to comply with the law and notify their members of the result,” Cole said.

“While some aspects of those laws may be adjusted following the review that the Government has recently announced APRA welcomes the Government’s ongoing commitment to measuring superannuation performance and creating transparency around the results.

“As I said earlier, what gets measured gets done, and there is much more to be done when it comes to tackling underperformance.

Elsewhere in her FSC speech, Cole pointed to the likelihood of further superannuation fund consolidation, noting that the industry still had 145 APRA-regulated funds “of which 105 collectively manage less than 9% of assets”.

“I can say that it is our view that the optimal size of the industry remains a fair distance from where we are now,” she said.