The Australian Prudential Regulation Authority (APRA) has published its latest ‘heat map’ of Choice superannuation products and named the worst-performing funds.
The map covers 163 products and compares funds across several benchmarks including investment returns, fees and costs.
The worst-performing funds are:
- OnePath – 33 options
- Equity Trustees – 30 options
- BT Retirement Wrap – 4 options
- Mine Super – 3 options
- Colonial First State – 3 options
- Energy Industries Super Scheme – 3 options
- AvSuper – 1 option
- MLC Super – 1 option
- Perpetual – 1 option
- Rei Super – 1 option
Options describes a separate product, such as a high-risk fund or shares, bonds or property.
The full heat map is available here.
Underperforming
According to MoneyMag, of the 407 Options with an eight-year history APRA analysed, 182 or 45 per cent underperformed the benchmarks.
APRA singled out 80 options that significantly underperformed. They are operated by trustees AUSCOAL Superannuation (Mine Super), Avanteos Investments (Colonial First State FirstChoice Super), AvSuper, BT Funds Management (Retirement Wrap), EISS Super, Perpetual (WealthFocus Superannuation Fund) and REI Super.
Equity Trustees’ Zurich Retirement Product, Umbrella Financial Plan Super, Crescent Wealth Superannuation Fund, and smartMonday were products marked with the lowest grade.
The research found that Choice products closed to new members are more likely to underperform and have higher fees than those that are open:
- Two-thirds of Choice investment options that are closed to new members had poor or significantly poor performance relative to the heatmap benchmarks. The heatmap showed 22 investment options (28 per cent) underperformed the benchmarks by up to 0.5 per cent, while a further 31 (39 per cent) significantly underperformed by 0.5 per cent or more.
- Average fees are higher in Choice products that are closed to new members. The average annual administration fee for members with an account balance of $50,000 in closed Choice products was $225, compared with $149 for open Choice products and $137 for MySuper products.
Sub-standard
APRA deputy chair Margaret Cole said that while the data shows some improvement in the performance of Choice products, there were still far too many delivering sub-standard returns.
“As a result, APRA’s supervision of poorly performing Choice products will intensify, and trustees can expect even greater scrutiny of their product offering,” Ms 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.”
Ms Cole says some members may choose to stay in closed investment options because of non-performance related benefits, such as insurance or financial advice.
“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.
Explainer: What is a Choice fund?
In Australia, you can travel two routes when you start contributing to a superannuation fund. You can accept the fund your employer provides – known as MySuper products – or you can choose your own, known as Choice products.
MySuper products are basic superannuation accounts without unnecessary features and fees. Choice funds generally have a large suite of products and options.
Super funds can offer many different Choice super products, but only one MySuper product.
Do you have a MySuper or Choice fund? Do you compare your superannuation’s performance? Why not share your advice in the comments section below?
Also read: Superannuation changes to hit Aussies aged over 60 hardest
Unfortunately, most (all?) of the superannuation comparisons I have seen have looked at the funds’ performance in the accumulation phase.
When I did a comparison of three funds a year or so ago, looking at their PENSION phase performance with an investment across several risk categories, the funds relative performance varied from that publicised generally.
Peter, I agree a very relevant point and of far more intetest to retirees than the accumulation phase. We can only wonder why YLC doesnt publish these figures given the far greater intetest to many readers.