Some failed super products should never have been tested – AMP

ANALYSIS

The message being sent by AMP Limited in the wake of some of its products being amongst the 37 trustee-directed superannuation products being deemed to have failed the superannuation performance test is that, in reality, it reflects a small subset of offerings.

It is also arguing that the products are not, in reality, trustee-directed offerings which should have been tested anyway.

The release by APRA of the performance test results undoubtedly fulfilled the worst fears of AMP Limited and Insignia Financial because, as was made clear during Treasury consultations, there are legitimate concerns about whether the performance test methodology is fit for purpose.

What also needs to be recognised is that it took more than two years for the methodology around the MySuper performance test to be refined to a stage where there is general acceptance. Also worth noting is that in the latest test exercise, no MySuper products actually failed.

But what is abundantly clear is that there is strong disagreement about the methodology and benchmarks of the test being applied to trustee-directed products and until these are resolved there should be no rush to apply the test to the broader and more complex choice super environment.

For its part, AMP on Friday found itself conducting a balancing act in which it welcomed the fact that its MySuper products had again passed the test while lamenting how a flawed methodology had hit its trustee-directed products.

It said that despite administration fees for the AMP wrap platform being among the lowest in the market, “we are disappointed that a small subset of investment options on the platform did not pass”.

“We are assessing the best approach for customers invested in these options going forward. We will also communicate with those impacted and their advisers to ensure they are aware of the implications,” AMP said in a formal statement.

“These investment options are only tested because they are inaccurately classified by the Government as ‘trustee directed’ and we strongly support industry calls for a review of the test. We don’t believe these options are ‘trustee directed’, meaning the current test is delivering misleading results and causing confusion and potential financial harm for consumers.”

“Consumers and their advisers have made active and informed choices to invest in these options based on individual circumstances and objectives. This is very different for most members who are invested in default MySuper superannuation funds.”

“This current form of the test only assesses 2% of Australia’s Choice platform investment market and excludes many of the platforms with the highest administration fees, making it impossible to use the test as the basis for properly informed investment decisions and product comparisons,” AMP said.