This means that failed bottoms can sometimes be surprisingly resilient. They may continue to lag despite their underperformance, so it is essential that these trustees are under some pressure to ensure that participants’ retirement savings are invested effectively and appropriately.


What has changed on this front since the royal commission?

A lot, Byres suggested, although he recognized that more needed to be done. The most significant change was APRA Annual Performance Test, in which the watchdog names and blames funds that fail to meet its benchmarks and asks them to write to members about their poor performance. If the funds fail the test for two consecutive years, they must close their doors to new members.

The test, which led to the closure of four funds to new members this year, helps solve the problem of “disengaged” members. This puts pressure on administrators in case of poor results in a way that did not happen before.

“It forced administrators who hadn’t lived up to their membership to kind of recognize that their membership would be better off in someone else’s hands,” Byres said.


Even when funds stay open because they don’t fail the APRA test for two consecutive years, public shaming benefits members because it usually results in fee reductions.

Super Consumers Australia said in a study last week that on average, funds that failed APRA’s tests reduced their fees by 20.64%. “The test is doing what it set out to do, cutting the tail of poor funds,” said group director Xavier O’Halloran.

However, there is still much to do.

O’Halloran points out that so far APRA’s performance test has covered MySuper products – no-frills super options designed to keep costs down. But the ‘choice’ part of the market that drew the most criticism from the royal commission has yet to face performance tests.

APRA also believes that members would benefit from more fund mergers, which should improve efficiency by allowing larger funds to spread their costs over a larger number of members. Byres said that while some smaller funds were performing well, there was a “long tail” of funds “challenged in terms of longevity”, and all the evidence suggested that the size of a fund matters.

Overall, Byres made it clear that APRA wants to keep the pressure on directors to act in the interests of members, and one of the best ways to do that is to shine a light on the funds. underachievers, so that they have “nowhere to hide”. “The spotlight on them will only get brighter and more intense,” Byres said.

  • The advice given in this article is of a general nature and is not intended to influence readers’ decisions regarding investments or financial products. Before making financial decisions, they should always seek their own professional advice that takes into account their personal circumstances.