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| One in five of Australia’s super funds is performing below benchmarks, analysis shows | |
| (32 minutes later) | |
| Watchdog’s analysis shows improvement on last year but 44% of so-called ‘choice funds’ are generating returns below expectations | Watchdog’s analysis shows improvement on last year but 44% of so-called ‘choice funds’ are generating returns below expectations |
| Australians have billions of dollars invested in poor-performing superannuation funds, according to a new analysis of superannuation funds by the Australian Prudential Regulation Authority (Apra) which shows that one-in-five investment options generating returns well below their benchmarks. | |
| The analysis of so-called “choice” funds – products workers can choose to join regardless of their workplace – includes subpar investments overseen by major financial names including the Commonwealth Bank-backed Colonial First State, OnePath, BT Funds Management and Equity Trustees. | The analysis of so-called “choice” funds – products workers can choose to join regardless of their workplace – includes subpar investments overseen by major financial names including the Commonwealth Bank-backed Colonial First State, OnePath, BT Funds Management and Equity Trustees. |
| The performance of individual funds are detailed on Apra’s heatmap, showing choice product offerings, which represent $995bn of members’ money out of the $2tn regulated by Apra. It does not include default MySuper funds offered by employers. | |
| The deputy chair of Apra, Margaret Cole, said: “While the data shows some improvement in the performance of choice accumulation products, the fact remains that there are still far too many products delivering sub-standard investment returns to fund members.” | The deputy chair of Apra, Margaret Cole, said: “While the data shows some improvement in the performance of choice accumulation products, the fact remains that there are still far too many products delivering sub-standard investment returns to fund members.” |
| The regulator’s list also calls out those investment options that have significant administration fees, where Equity Trustees is among the names cited. | The regulator’s list also calls out those investment options that have significant administration fees, where Equity Trustees is among the names cited. |
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| Newer funds, including Spaceship Super and Student Super, are also included on the list of those that have high-fee products. | Newer funds, including Spaceship Super and Student Super, are also included on the list of those that have high-fee products. |
| Investment options with high fees tend to have lower levels of member benefits, the analysis shows. | Investment options with high fees tend to have lower levels of member benefits, the analysis shows. |
| The Apra data covers 163 products, representing $292bn worth of members’ money. | The Apra data covers 163 products, representing $292bn worth of members’ money. |
| While one-in-five investment options with an eight-year performance history had “significantly” underperformed benchmarks, about 44% were generating returns below expectations. | While one-in-five investment options with an eight-year performance history had “significantly” underperformed benchmarks, about 44% were generating returns below expectations. |
| The analysis marked a slight improvement on last year’s report, although the number of products generating poor returns is still too high, according to the regulator. | The analysis marked a slight improvement on last year’s report, although the number of products generating poor returns is still too high, according to the regulator. |
| The analysis also showed that products that had closed to new members were more likely to underperform and have higher fees. Fund managers often close products to new members due to low demand or poor performance. | The analysis also showed that products that had closed to new members were more likely to underperform and have higher fees. Fund managers often close products to new members due to low demand or poor performance. |
| Apra found administration fees for that cohort to be particularly high. Average annual fees for account balances of $50,000 in closed choice products is $225, compared with $149 for open products. | Apra found administration fees for that cohort to be particularly high. Average annual fees for account balances of $50,000 in closed choice products is $225, compared with $149 for open products. |
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| Fees for MySuper products, used as a base-level default option for those who don’t choose a fund when starting a new job, are $137. | Fees for MySuper products, used as a base-level default option for those who don’t choose a fund when starting a new job, are $137. |
| Cole noted that some super members stayed in closed investment options because of non-performance benefits such as insurance offerings. | Cole noted that some super members stayed in closed investment options because of non-performance benefits such as insurance offerings. |
| “Even so, Apra encourages all superannuation members to check whether they are satisfied with the outcomes they are getting from their chosen investment strategies,” she said. | “Even so, Apra encourages all superannuation members to check whether they are satisfied with the outcomes they are getting from their chosen investment strategies,” she said. |
| Cole said trustees who oversee investment decisions will be scrutinised. | Cole said trustees who oversee investment decisions will be scrutinised. |
| “Trustees with products that are underperforming or have unjustifiably high fees – or both – will need to explain why they haven’t already moved their members to products with better performance and better fee structures,” Cole said. | “Trustees with products that are underperforming or have unjustifiably high fees – or both – will need to explain why they haven’t already moved their members to products with better performance and better fee structures,” Cole said. |
| This story was amended on Friday 28 April to remove a table which contained a number of data errors. |