If you're the largest bank in Australia, and on the ASX, it's probably not a good look to have one of the nation's worst-performing superannuation funds in your wheelhouse. Yet that is the fate that seems to lie in front of Commonwealth Bank of Australia (ASX: CBA) today.
The federal government passed the You Future Your Super reforms in parliament earlier this year. As a result, super funds offering a default 'MySuper' product now have to pass an annual performance test. This test assesses both fees and fund returns. Well, the first batch of test results has just come through. And they did not have good news for CBA.
According to a report in today's The Sydney Morning Herald (SMH), the Commonwealth Bank will now have to send letters containing the following words:
Your superannuation product has performed poorly under an annual performance test that was introduced by the Australian Government to make sure Australians are getting the most out of their super…
As a result, we are required to write to you and suggest that you consider moving your money into a different superannuation product… Switching to a different super product is easy, and there are no fees involved.
Ouch.
Image source: Getty Images
CBA hits a super foul ball
Yes, according to the report, Commonwealth Bank Group Super is one of the funds that will have to send one of those letters to their customers. Some others include Westpac Banking Corp's (ASX: WBC) BT Super Fund. As well as Christian Super's MyEthical and Maritime Super's MySuper.
Although 84% of the funds assessed passed, the above funds were part of the 16% which did not.
The Australian Prudential Regulatory Authority's (APRA) Margeret Cole told the SMH the following on these results:
Trustees of the 13 products that failed the test now face an important choice. They can urgently make the improvements needed to ensure they pass next year's test or start planning to transfer their members to a fund that can deliver better outcomes for them.
If the fund's fail this benchmark again next year, they will be banned from accepting new members at all.
But Martin Fahy, chief executive of the Association of Superannuation Funds Australia, doesn't entirely agree with the process. Here's some of what he was quoted as stating in the report:
ASFA has long supported the orderly removal of habitually underperforming products. However some of those called out by this test are in fact good products which have delivered excellent returns to their members over a long period of time…
This is a retrospective, relative performance assessment where the so-called underperforming products are compared against top-performing products.
Even so, it looks as though these new tests are here to stay. So if you've got a MySuper product for your retirement savings, maybe it's time to check out how it's performing!
