What is MySuper and what does it mean for me?
What is MySuper and what does it mean for me?
On 31 August, the Australian Prudential Regulation Authority (APRA) released results for the first Your Future, Your Super (YFYS) annual performance test. Broadly, the net return of a superannuation fund’s MySuper product was assessed against a benchmark assessed by APRA. Products that underperform that benchmark by 0.50% or more will fail the test.
APRA assessed 76 MySuper products in total, 13 of which failed to meet the benchmark. This has led to significant media attention and subsequent concern from clients. It is important to note that as an advised client you are less likely to be impacted by this report however we would like to address your concerns with the information below.
What is MySuper?
A MySuper product can be a stand-alone product or it can be offered as one of many investment choices available within a regular superannuation fund. Employees who do not choose their own super fund will be assigned to the ‘default’ MySuper fund selected by their employer.
What is creating significant concern for many Australians in relation to the results of this performance test is that large super brands, both retail and industry super funds have appeared on the “failed” list. It is important to understand that many of these brands provide choice across a number of superannuation products and investment options, and it is only their MySuper option that the performance test is referring to.
The Performance Test and its Limitations
The concept of a performance test is well-meaning as it helps protect disengaged super members from sub-standard outcomes. However, as an advised client would well understand, investment performance is just one of a number of factors that need to be considered when making an investment decision. APRA has said that the test is just a starting point and will be adjusted and improved over time.
One of the drawbacks of the test is it assesses how well a fund has implemented its investment strategy versus the benchmark, but does not test whether or not it is a good strategy for individual members. It does not consider the individual needs of members in relation to the level of risk you are prepared to take, the fund’s investment style and how that performs in different market environments or whether the fund’s investment philosophy on issues such as the environment, social and governance factors aligns with your values.
APRA has not indicated which MySuper investment options marginally passed or marginally failed the test. Many fund members may also incorrectly assume that a fund pass mark means their fund is ‘good’ and fail to investigate whether the fund is best for their individual needs.
What if I do have a MySuper fund that failed the performance test?
If you are invested in one of the MySuper options identified on the list and you receive a letter from the fund, don’t panic. Consider using this as an opportunity to review your investment strategy.
As part of our ongoing review service, we are able to review the suitability and performance of your super in the context of your broader financial goals. If we do review and recommend a product as part of this process, you can be assured that we’ve determined that the product is suited to your personal situation and financial goals.
Should you have any questions or wish to discuss further please contact our office.
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