My Superfund Sent Me a Letter, Now What?
There are currently over 1 million super accounts held across thirteen funds that have failed the Australian Prudential Regulation Authority’s (APRA) first performance test.
Under the Australian Federal Governments Your Future, Your Super reforms introduced on July 1, funds are now required to notify members of their underperformance, in writing. If you have received one of these letters, know you’re not alone.
Here are your next steps to assessing if your fund is working in your best financial, and environmental, interests.
Step One – Contact Your Superfund
CEO of lobby group the Association of Superannuation Funds of Australia (ASFA), Martin Fahy, says the most important thing is to take your time when considering switching your fund or even assessing your existing fund.
‘Your fund will talk to you, pick up the phone, use the chat function or business app and look at the fees paid versus the investment returns.’
‘Funds may have invested in 2000 different shares or may hold 200 to 300 different properties. It is easy to get lost in the details’ Dr. Fahy says.
‘But they will disclose, at an appropriate level, what their holdings are, the type of properties they are holding and their attempts to try and improve the emissions footprint of those holdings.’
Step Two – Analyse Your Superfund's Long-Term Performance vs. Annual Fees
According to a 2019 Productivity Commission review into superannuation, Australians spend more than $30 billion in super fees every year. A 0.5 per cent point difference in fees can cost a typical full-time worker up to 12 per cent of their balance - or $100,000 - by the time they retire.
The Your Future, Your Super reforms consider a fund’s performance over a seven-year period, versus the annual fees paid, to calculate the result. Funds were not provided the opportunity to adjust their annual fees, to ‘scrape past’ the first APRA performance assessment.
A positive of the recent reforms, is the strong incentive for funds to reduce their annual fees, moving forward. Your fund may have adjusted or lowered their fee recently, so it’s important to check what you are paying.
The Australian Taxation Office (ATO) has provided a basic comparison tool to assess over 80 different superfund products based on their annual fees and net returns over six years.
There is also a personalised version of this tool that you can access through the MyGov ATO platform, which assesses the balance and performance of your current superannuation against other funds available.
Step Three – You Could Lose Your Insurance
Many super members also hold insurance for total and permanent disability (TPD) and death. Be aware that if you switch out to a new fund, you could lose that insurance cover. Before you make the switch, ensure you are receiving the same amount of cover in your new fund or potentially, look at keeping an amount with your existing fund to retain your TPD and death insurance cover.
Step Four – Does the Fund Align with Your Values?
A criticism of the APRA performance test is that it does not account for funds that may be heavily weighted towards lower-performing stocks yet invest in them for ethical reasons.
Funds that have chosen not to hold stock in Amazon in their international equity portfolio, for example, due to ongoing unethical labour practices, have returned performance significantly lower than the APRA benchmark. It is important to consider, if your fund is underperforming financially on investment, is it instead, aligning with your ethical and environmental values? Funds are more committed than ever to driving and supporting issues around climate change and working towards net zero emissions, but also issues around modern slavery, social license to operate and good governance.
Almost all APRA regulated funds publish their Environmental Social Governance (ESG) policies on their website and will provide details on how they evaluate for carbon and other practices, when investing. Your fund should be providing this information in an annual report which can be accessed via their website. In the case of larger funds, such as Australian Super, holding assets are disclosed in large amounts of detail for consumers. There are also specialist funds available who take ethical or impact investing and ESG considerations one-step further than APRA regulated funds.
Some funds also invest in impact housing for vulnerable groups with a stable, low risk on investment. However, these returns are reflected, situating funds well below the index. The property benchmark used by APRA to assess performance consists of commercial properties with high rents and higher risks associated with the investment, therefore allowing these funds to pass the test. Allow time to research your funds overall investments into ethical stocks and impact housing, prior to making the switch.
Underperforming Funds
Fund and MySuper Account | Annual Fee | 7-year net return (%pa) |
AMG Super – AMG MySuper | $350 | 6.92% |
Commonwealth Bank Group Super (Accumulate Plus Balanced) | $438 | 6.26% |
Energy Industries Superannuation Scheme Pool A – Balanced (MySuper) | $445 | 6.02% |
Colonial First State FirstChoice Superannuation Trust | $450-505 | 4.54%-7.8% |
Labour Union Co-Operative Retirement Fund - MySuper Balanced | $497 | 7.22% |
Maritime Super - MySuper Investment Option | $533 | 6.21% |
Retirement Wrap - BT Super MySuper | $558-573 | 3.63%-8.51% |
ASGARD Independence Plan Division Two - Asgard Employee - MySuper | $558-573 | 3.54%-7.95% |
Australian Catholic Superannuation and Retirement Fund - LifetimeOne | $558-573 | 5.86%-7.14% |
The Victorian Independent Schools Superannuation Fund - VISSF Balanced Option (MySuper Product)* | $577 | 7.58% |
Boc Gases Superannuation Fund - MySuper* | $604 | 6.95% |
AvSuper Fund - AvSuper Growth (MySuper) | $605 | 7.53% |
Christian Super - My Ethical Super | $610 | 6.93% |
*Restricted membership
Taking these important steps to switching your superfund or indeed, assessing your existing superfund's performance, could boost the average workers retirement balance by $660,000.
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