Firms impacted by the Australian Prudential Regulation Authority’s (APRA) latest performance test have begun taking action in order to rectify the potential harm caused to their consumers.
On Thursday, APRA reported that 96 trustee-directed products failed to meet the test benchmarks. The regulator said three-quarters of these products were concentrated among four trustees, namely Insignia-owned Nulis Nominees, Oasis Fund Management, OnePath Custodians, and AMP-owned N M Superannuation.
In a statement issued shortly after APRA’s results went public, Insignia stressed that, across its super funds, 5,000 members with approximately $350 million were affected, representing less than 1 per cent of its total member and asset base.
“While this represents a small cohort of members, it is a disappointing outcome for them and we remain highly focused on delivering improvements whilst protecting members’ interests in this process,” said Mark Oliver, head of superannuation and chief distribution officer at Insignia.
“For example, our strategic initiative to migrate members (subject to trustee approvals) to our contemporary Expand platform, we anticipate, will positively impact member outcomes and address some elements which have impacted this year’s performance test results.
“Additionally, the investment teams under the proven leadership of our chief investment officer Dan Farmer, have been working through a simplification program, and the go-forward strategies are expected to improve the future performance of the investment options that have failed the test.”
Mr Oliver previously said applying the test to platforms is “ill-conceived” and “unlikely” to reflect a member’s actual experience.
Following the failures, he indicated that Insignia’s immediate priority is to assist members.
“Members who receive notification from their superannuation fund are urged to speak to a financial adviser before making an investment decision that may not be in their individual interests,” Mr Oliver said.
AMP
In its response to the test results, AMP highlighted that all of its default super options, and the majority of its trustee-directed products, received a pass.
“However, the extension of the test this year to a small subset of wrap investment options deemed to be trustee-direct products, will cause confusion and potential harm to consumers invested in them,” warned Edwina Maloney, group executive, platforms at AMP.
“In its current form, the test applies a ‘one size fits all’ methodology to these wrap investment options which, in some cases, are designed to offer different risk characteristics and performance outcomes than contemplated by the test.”
Ms Maloney suggested that, in many cases, options that failed to meet the test’s benchmark were legacy closed funds that advisers and their clients chose to remain invested in.
“Members could suffer financial detriment if they choose to move now as a result of the test, without first seeking advice,” Ms Maloney said.
“AMP continues to urge the government to reconsider the test methodology for wraps, improve transparency and to address the immediate issue of providing tax relief for consumers having to exit products which haven’t met their performance benchmark.”
Australian Retirement Trust
A spokesperson for ART said the $260 billion super fund was “disappointed” that the QSuper Socially Responsible option failed the 2023 performance test. ART was formed from the merger of QSuper and Sunsuper in February last year.
“We take investing our members’ retirement savings seriously. In accordance with our merger transition program, we are moving towards a harmonised investment menu for all members from next year,” the ART spokesperson explained.
“As such, we intend to close this option from 1 July 2024 and members will be able to choose other investment options, including Australian Retirement Trust’s Socially Conscious Balanced option. In the meantime, we have already made a range of changes to this option’s investment strategy and asset allocation which we believe will improve its performance.”
According to ART, the QSuper Socially Responsible option returned -0.41 per cent p.a. during the 2023 financial year. Over the nine-year time horizon assessed as part of APRA’s 2023 performance test, the option was reported to have returned 4.5 per cent p.a.
AMG Super
The only MySuper product that failed APRA’s test this year was AMG MySuper, which closed to new members last year. AMG Super has since rebranded to become Acclaim Wealth.
In a statement, Acclaim noted that it had recently announced its decision to close the AMG MySuper product to existing members.
“After a review of the MySuper offer, which makes up less than 10 per cent of our portfolio, Acclaim, in conjunction with our trustee, Equity Trustees Superannuation Limited (ETSL), has decided that closing AMG MySuper will provide the best outcome to members,” Acclaim said.
“We are working closely with ETSL to ensure members invested in the AMG MySuper option receive the best outcome following the termination of the option.”
AMG Super has failed the test in each of its three years of operation. A total of 13 products failed in 2021 while five products failed in 2022, including four for a second time.
Things don’t change much…AMP, IOOF (hiding under Oasis/Voyage AND Insignia), OnePath (ex ANZ bank) and ART (ex Suncorp Bank) were all noted in the Banking Royal Commission for their less than acceptable service to and treatment of clients. AMG Super is, like all three above, another public, profit-seeking corporation. When will it become obvious that these financial institutions have inherent conflicts of interest in providing superannuation? Superannuation should not be a financial product, being as it is so important to the future welfare on millions of Australians, which allows corporate profits to be skimmed off the top of it. Industry Funds, especially well performing ones like Hostplus and Australian Super, and smsfs are in reality the best options. Why? Because they exist only for their members. However, even in these days when Advisers receive no commissions from superfunds, one has to question the wisdom of Advisers who keep recommending these poor performing, corporate ‘also-rans’. Who cares if 5000 people are just 1% of total members. That is a poor defence. Every member deserves to be treated well and 5000 not being treated as such will always be 5000 too many.
Well, no surprises there. That’s how they make money for themselves. They always find a way!!!!