About the Super Members Council
The Super Members Council (SMC) represents more than 11 million Australians with over $1.5 trillion in retirement savings managed by profit-to-member superannuation funds. The council aims to protect and advance member interests through research, advocacy, and analysis to ensure superannuation policy is stable, effective, and equitable.

Executive summary
SMC finds that the existing super performance test significantly benefits consumers and should continue to operate. Key recommendations include strengthening the test with simple immediate improvements, further investigating broader structural options proposed by Treasury, and applying consistent principles to any changes to provide clarity for investors and long-term benefits for superannuants.

Driving better returns for members
The Your Future, Your Super (YFYS) performance test has applied to MySuper products since 1 July 2021. SMC supports its continued use, noting its crucial role in driving better returns. Coupled with APRA heatmaps, the test has improved member outcomes by making funds more accountable and sharpening the focus on returns.

An opportunity to improve the test now
Several simple improvements can be made in the short term to strengthen the test’s original design. SMC recommends strengthening the consequences of failing the test and making funds with failed products responsible for transferring members into well-performing alternatives. Additionally, the council suggests incorporating a single administration fee benchmark and extending the YourSuper comparison tool to other accumulation products.

The performance test – how well is it working?
The test has successfully held trustees to account, encouraged the exit of poor-performing products, and protected member interests. It has directly led to reductions in total fees across most MySuper products and provided quantitative metrics to assess the value trustees add relative to benchmarks.

Evidence of better results for super fund members
Since the test began, median representative administration fees and expenses (RAFE) have declined from 0.32 per cent to 0.27 per cent. Median total fees have reduced from 1.05 per cent to 0.91 per cent. Approximately 80 per cent of MySuper products recorded total fee reductions, delivering aggregate fee savings of almost $1 billion in 2022-23.

What’s occurred with products that failed – successor funds and member outcomes
While over 800,000 member accounts in failed MySuper products were transferred to better alternatives, SMC analysis reveals concerning trends. Approximately 210,000 members either transferred to or remained in poor-performing products. There are stark sectoral differences; 97.7 per cent of members in profit-to-member funds moved to top-performing alternatives, whereas none of the failing retail products led to transfers into top-performing options.

Responses to trustee-directed product failure
The test revealed that 25 per cent of platform Trustee-Directed Products (TDPs) failed, and 23 per cent are performing poorly. SMC recommends urgent steps to gather data on how trustees and members have responded to these failures to better protect member interests.

Consequences of failure
SMC argues that consequences must be strengthened, as currently, 90 per cent of members in failing products remain in them despite mandated communications. The council recommends that funds with failed products should have an explicit obligation to transfer members to better-performing products in a timely manner.

Performance and value-add
Profit-to-member funds have added a cumulative value of $18,484 million since the test’s inception, while the retail sector has seen a cumulative value-add of -$637 million. For a representative member with a $50,000 balance, this equates to a cumulative gain of $1,164.70 in a profit-to-member fund compared to a $246.10 loss relative to benchmarks in a retail fund.

Coverage of the test across the product universe
The test currently covers MySuper and TDPs, leaving $651 billion in assets out of scope. While 80 per cent of profit-to-member assets are assessed, only 40 per cent of retail super assets are covered, meaning many retail members lack the same transparency and performance safeguards.

There is room for improvement in the current test
The existing test assesses implementation relative to a Strategic Asset Allocation (SAA) benchmark but does not evaluate the quality of the strategy itself. SMC recommends further consideration of broader factors, including the quality of strategy and risk management, which account for roughly two-thirds of observed performance differences.

Administration fees
SMC suggests that separate benchmarks for MySuper and platform TDPs may inappropriately entrench high fees. Platform TDPs have a benchmark RAFE of 0.54 per cent, roughly twice that of non-platform TDPs (0.27 per cent) and MySuper products (0.26 per cent). The council recommends a single administration fee benchmark based on member weighting and assessing these fees over a ten-year period.

Improvements to the YourSuper comparison tool
SMC supports the recent change to default sorting by net returns rather than fees, as the correlation between fees and net returns is weak (R² = 0.0304). The council recommends extending the tool to all accumulation products with similar risk characteristics.

Retirement products
SMC recommends the Government develop a quality filter for retirement products that considers the unique objectives of the retirement phase, such as maximising income, managing longevity risk, and providing flexible access to funds.