APRA pulls no punches on 2nd performance test fail

Superannuation funds facing failing the superannuation performance test will be told of their looming failure ahead of time.

What is more, superannuation funds which failed last year’s performance test have been placed on notice of the need to forewarn stakeholders if they are in danger of a second fail.

The Australian Prudential Regulation Authority (APRA) has updated information around its handling of the performance test, including ensuring that failing funds are notified before the information goes public.

The regulator said it would provide written notification to each superannuation fund of their product’s performance test result prior to publication – at the end of August each year.

“Recognising that the timing between the running of the performance test and notification is short, APRA’s ability to provide any results in advance of publication is limited,” it said. “However, provisional results will be provided to RSE licensees ahead of publication where a product appears likely to fail the test.”

APRA has also left no doubt that once a superannuation fund fails the performance test in two consecutive years they will not be able to accept new members into the failed product until it subsequently passes a future performance test.

“RSE licensees are expected to have administrative processes in place to ensure they comply with their legislative obligation to prevent new beneficiaries from holding the product on and from the day the second fail notification is received.  Any contributions received from or on behalf of persons who were not holding the product before that day will need to be returned,” the regulator’s update said.

“APRA expects RSE licensees of MySuper products that failed last year’s performance test to be engaging closely with their employer-sponsors, promotors and other key stakeholders to ensure they are aware that the product may be closed to new beneficiaries if the product fails this year’s performance test.”