Did your superfund measure up against APRA’s recent performance test?

Last month, the Australian Prudential Regulation Authority (APRA) released the results of its 2023 superannuation performance test, calling out almost 100 superannuation products that failed to meet testing benchmarks. 

For the first time, APRA will soon send letters to members of these underperforming funds to warn them of the results. The move comes as the Australian Government also seeks to enshrine an objective for superannuation into legislation with the release of the Superannuation (Objective) Bill 2023.

For Canberrans, like most Australians, superannuation can often be relegated to the "deal with it later" pile – something to be cared about at a later stage in life. Yet, with the recent increase in the minimum superannuation amount to 11%, and a schedule for further increases continuing until 2025, it's worth knowing exactly where your hard-earned money is going.

Chris Oates and Lindsay Walker, financial advisers from RSM in Canberra, say the release of APRA’s report and subsequent letters is a timely reminder to revisit your superannuation investment strategy. 

“APRA has continued to tighten its monitoring of superfunds' performance,” says Chris. “With underperforming funds receiving spotlight and the impending wave of advisory letters, we would encourage all Canberrans to take a fresh look at their super investment options.

“Many people initially go with a default fund or choose a super product when they're younger, and then put it on the backburner. This can be unhelpful in the long term as financial markets, super regulations, and even personal circumstances change. Failing to review and adjust your super investment from time to time could mean missing out on better opportunities or taking on unnecessary risks. It's important to make an effort to re-evaluate your super choices, especially at different stages of life."

Weighing your superfund choices

When weighing superannuation fund options, most people only consider industry superfunds or self-managed superfunds (SMSFs). But Lindsay reminds us that there’s a third option which has become increasingly appealing in recent years. 

"Running an SMSF can be expensive and complex, and if you're only interested in stock trading you might be better served by a personal super account. By utilising the admin services of a superannuation provider, you can get access to a wide range of wholesale managed funds and perform share trades at low costs. It's a middle-ground option that mimics the control an SMSF offers but without the overheads.

"In these accounts, you can choose investments to suit your unique needs unlike a generic balanced fund. It provides the chance to be more hands-on with your investment decisions, such as a specific preference for ethical or ESG investing.”

Chris adds that it’s important to remember that comparing superfund options and products isn't always about performance – there are other factors at play.  

“Make sure you’re comparing apples to apples. If you're assessing two funds, one may show higher returns in a good year but carry greater risks. Factor in fees, ease of communication, and additional features like life insurance. Make sure the fund suits your long term objectives, appetite for risk, and wealth accumulation strategies.”

Having a third-party run a comparison

If you’re in the market for a new superfund and don’t know where to start, Chris and Lindsay both suggest engaging a third-party to run a comparison of superannuation products for you. 

"Having an adviser means you've got someone to do the legwork for you. For example, when we work with clients, we look at everything from an objective viewpoint and use specialised tools to identify superfund options that are best suited to the individual." 

These tools allow us to consider a wide array of factors, including your:

• current super balance
• life stage
• desire to make extra contributions
• risk tolerance
• financial goals 
• investment preferences

“We also evaluate tax implications and assess each fund's performance history, fee structure, and the range of investment options it offers. If relevant, we’ll consider any insurance coverage provided through the fund, as well as its customer service and ease of management.”

If you are among those receiving a letter from APRA about your superfund's underperformance, consider it an invitation to revisit your investment strategy. You may find you're not as happy with your current setup as you thought, and decide the time is right for a change.  
 

FOR MORE INFORMATION

If you would like to learn more about the topics discussed in this article, please contact Chris Oates or, get in contact with your local RSM office.

Note: past performance is not an indicator of future results.

This article has been prepared by RSM Financial Services Australia Pty Ltd ABN 22 009 176 354, AFS Licence No. 238282.

As everyone's circumstances are different and this article doesn't take into account your personal situation, it is important that you consider the above in light of your financial situation, needs and objectives, and seek financial advice before implementing a strategy.

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