APRA Test Reveals Major Gap in Safeguards

The Super Members Council (SMC) has drawn attention to a structural weakness in the way Australian superannuation performance is monitored, noting that a substantial share of assets managed by APRA‑regulated funds fall outside the existing performance test. By highlighting the breadth of products that escape the test—particularly those delivered through newer platform arrangements—the council argues that many Australians are missing out on a key safeguard designed to flag underperforming options.

According to the council, the performance test serves as a critical filter, weeding out super products that consistently lag behind a benchmark and ensuring that the retirement savings of working Australians are not eroded by sub‑par investment outcomes. The test’s role, as described by SMC chief executive Misha Schubert, is to provide a clear, system‑wide standard that can be applied uniformly, thereby preventing members from being left in the dark about the health of their super holdings.

Schubert emphasizes that the current exclusion creates an uneven playing field: members whose savings are allocated to products outside the test lack the same level of visibility and protection. This disparity, the council says, undermines consumer confidence because the safety net that applies to a majority of the system does not extend to a significant minority of accounts.

Beyond the coverage gap, the council is also sounding the alarm on “fee gaming,” a practice where administrators adjust fees in a manner that can mask underlying investment weakness. The performance test evaluates administration fees based on the most recent twelve‑month period, while investment returns are measured against a ten‑year horizon. This mismatch, the council points out, opens the door for tactical fee reductions toward the end of a reporting year, allowing a product that is delivering poor returns to still meet the benchmark when the fee component is temporarily lowered.

APRA’s own warnings from the previous year showed that the risk of fee gaming had not been eliminated, reinforcing the council’s call for a redesign of the test to close this loophole. By aligning the assessment windows for fees and investment performance, the council believes the test could deliver a more accurate picture of a product’s true value to members.

The council’s analysis also brings to light a pronounced divergence between profit‑to‑member structures and retail‑oriented offerings. While profit‑to‑member products tend to deliver stronger outcomes relative to the benchmark, retail products lag significantly behind. This split suggests that the underlying governance and fee structures of different product types have material effects on performance, a nuance that the council argues should be reflected in any future expansion of the test.

In response to these findings, SMC has consistently advocated for extending the performance test to encompass all savings‑phase superannuation products, regardless of how they are packaged or delivered. The council’s position is that every member, whether invested through a platform, a traditional fund, or a retail product, deserves access to comparable information and the same level of protection against persistent underperformance.

Looking ahead, the council is also supporting the development of a bespoke retirement‑quality filter aimed at the retirement phase of superannuation. This filter would provide a parallel set of consumer safeguards, ensuring that members who have moved beyond the accumulation stage continue to benefit from transparent performance assessments and are not left vulnerable to the same gaps that affect the savings phase.

Policymakers are now faced with the task of balancing the need for full oversight with the operational realities of a diverse superannuation setting. The council’s recommendations show the importance of a uniform testing regime that can adapt to evolving product designs while maintaining rigorous standards for both fee structures and investment returns. By addressing the identified coverage gaps and the potential for fee manipulation, the proposed reforms aim to reinforce the integrity of the super system and protect the retirement outcomes of all Australians.