Since 2021, APRA (the Australian Prudential Regulation Authority) has run an annual performance test on MySuper products, the default super options that most employees are placed in automatically. Funds that fail the test must notify their members in writing. Members in consistently underperforming funds are losing tens of thousands of dollars over a working lifetime.
The APRA performance test compares each fund's investment returns against a tailored benchmark over a rolling 8-year period. The benchmark is constructed using the fund's own reported asset allocation, so it accounts for whether a fund holds more property, shares, or fixed income.
If a fund's net investment return falls more than 0.50 percentage points per year below its benchmark over the 8-year period, it fails the test. Note: this is measuring risk-adjusted underperformance relative to the fund's own stated strategy, not just absolute returns.
The test also incorporates fees. A fund charging high fees but delivering returns that would otherwise pass may still fail once fees are subtracted. Lower-cost funds have a structural advantage in this test, which is partly the point.
In the first year of testing (2021), 13 MySuper products failed. In 2022, the number dropped to 5 products as some funds merged, closed underperforming options, or improved returns. In subsequent years, the test has continued to identify a small number of persistent underperformers.
Funds that fail must write to their members within 28 days of the APRA announcement. The letter must include a direct comparison of the fund's performance against the benchmark and a statement that the member can consolidate their super into another fund. The ATO's YourSuper comparison tool at ato.gov.au lists current test results for all MySuper products.
Underperformance of 0.5% per year sounds small. Over a working lifetime it is not. APRA has published analysis showing that a member in a consistently underperforming fund over 20 years can end up with a balance that is $50,000 to $100,000 lower than a member in a median-performing fund, holding all else equal.
On a starting balance of $100,000 compounding over 20 years, the difference between a net return of 6.5% and 6.0% per year is approximately $52,000 in final balance. That difference comes entirely from the underperformance gap.
The performance test currently applies to MySuper products only. These are the default investment options that employees are placed in if they do not actively select a fund. APRA expanded testing to trustee-directed products (a category of choice options) from 2022 onwards, but the full breadth of the choice product market is not yet covered.
If you have actively selected a specific investment option within your fund, that product may not be subject to the annual APRA test. You need to check its performance manually using the fund's own performance disclosure or the APRA fund-level statistics published at apra.gov.au.
Go to ato.gov.au and use the YourSuper comparison tool. It lists all MySuper products, their fees, their net returns over 1, 3, 5, and 7 years, and their most recent performance test result. Funds that have failed are clearly marked.
You can also log in to your myGov account and link to ATO Online to see your current super balance, fund, and any performance test notifications related to your account.
Failing the performance test does not automatically mean you should switch. One failure, depending on the margin and the fund's trajectory, may not be determinative. Two consecutive failures are more significant. A fund that fails twice must be closed to new members under the current rules.
If your fund has failed once, review the APRA benchmark data in detail. Look at the size of the underperformance gap and whether the fund's fees are above or below average. The median MySuper fee in 2024 sits around 0.85% to 1.0% of assets per year. Funds charging above 1.2% face a substantial headwind before performance is even considered.
Check how your super fund compares and whether it has passed the APRA performance test.
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