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Your Future, Your Super Frequently Asked Questions

The frequently asked questions on this page provide guidance to registrable superannuation entity (RSE) licensees on the measures included in the Government’s Your Future, Your Super (YFYS) reform package, announced in the 2020-21 Budget. The Treasury Laws Amendment (Your Future, Your Super) Act 2021 (the YFYS Act) came into effect on 1 July 2021.

Updated: 26 July 2022

Performance Test

 

The performance test applies from 1 July 2021 to MySuper products, and from 1 July 2023 to trustee-directed products. The assessment under the performance test, in conjunction with the ATO’s YourSuper comparison tool, is intended to hold RSE licensees to account for underperformance through greater transparency and increased consequences. Where a product fails the performance test in two consecutive years, the RSE licensee will be prohibited from accepting new beneficiaries into that product.

These frequently asked questions provide general and technical guidance to RSE licensees on the annual performance test.

Trustee directed products

 

1. Are investment options held through platform structures classified as trustee directed products (TDPs)? 

Yes, the performance test applies at the investment option level. As such, any investment option offered either directly or through another mechanism (e.g. platform or master trust) that satisfies the requirements set out in regulation 9AB.2(2) of the SIS Regulations, and does not fall within an exception specified in regulations 9AB.2(5) to (7), will be classified as a TDP.

2. If an investment option is a TDP under one RSE licensee, will it be deemed to be a TDP if offered by other RSE licensees?

No, the definition of a TDP requires certain requirements to be satisfied as set out in regulation 9AB.2 of the SIS Regulations. As such, the determination of whether an investment option is a TDP will depend on the particular circumstances of each individual RSE licensee. For example, the “control exception” in regulation 9AB.2(7) may be satisfied in relation to one RSE licensee but not another. 

3. If a TDP fails the performance test under one RSE licensee, will it be deemed to have failed the performance test when offered by other RSE licensee?

No, the performance test is calculated using RSE licensee-specific data relating to the TDP. As such, the performance test outcome is specific to the RSE licensee. 

However, if an investment option fails the performance test, APRA expects all RSE licensees offering the option (regardless of whether it is classified as a TDP as part of their offering or not) to consider whether the performance of the investment option allows the RSE licensee to hold the view that it is in the best financial interests of members for the option to be continued to be offered.

4. Can a managed investment scheme, held through a connected entity, be classified as a TDP?

Yes, a managed investment scheme (the investment option) that is held through a connected entity will be classified as a TDP if it satisfies the requirements set out in regulation 9AB.2(2) of the SIS Regulations and does not fall within an exception specified in regulations 9AB.2(5) to (7).

5. Can investment options that have no strategic asset allocation benchmarks be classified as TDPs?

Yes, the performance test will be calculated using data reported on Reporting Form SRS 550.0 Asset Allocation (SRS 550). Benchmark allocations reported on SRS 550.0 are the allocation targets RSE licensees have adopted to meet the investment objectives of their investment strategy under Prudential Standard SPS 530 Investment Governance (SPS 530). Paragraph 20(a) of SPS 530 states: 

An RSE licensee must, at a minimum, determine for each investment strategy for an investment option that includes multiple assets and/or asset classes:

(a) asset allocation targets and ranges that are appropriate to the investment objectives of the investment option;

As such, APRA expects strategic asset allocation targets to be reported for each investment option that invests in multiple asset classes in SRS 550.

Prudential Practice Guide SPG 530 Investment Governance (paragraphs 40 and 41) provides further guidance that irrespective of asset allocation approach (e.g. dynamic asset allocation), APRA expects RSE licensees to establish formal approaches to determining asset allocations including establishing initial target asset allocations and ranges as required under SPS 530.

General

 

1. Will APRA use data submitted after 15 August for the performance test? (NEW)

The Your Future Your Super regulations specify the use of data available to APRA as at 15 August each year. For the relevant assessment year, APRA will not include any updated data received after 15 August other than in exceptional circumstances.

2. When will RSE licensees be notified of their annual performance test results? (NEW)

APRA will provide written notification to each RSE licensee of their product’s performance test result prior to publication.  Publication of the outcomes of the performance test for all products that have been assessed will occur end of August each year. 

Recognising that the timing between the running of the performance test and notification is short, APRA’s ability to provide any results in advance of publication is limited. However, provisional results will be provided to RSE licensees ahead of publication where a product appears likely to fail the test.

3. Can an RSE licensee request that its result is not published by APRA?

No. There is no discretion for APRA to exempt a product from having its results published by APRA.

4. Are RSE licensees required to notify beneficiaries of their performance test result?

An RSE licensee must give notice to its beneficiaries who hold a product that has failed the performance test. The notice must be provided in the prescribed form, within 28 days of an RSE licensee being advised of its determination by APRA.

5. Can an RSE licensee be exempted from providing notice to beneficiaries if it is in the process of transferring its beneficiaries to another product or fund?

No. There is no ability under the legislation to exempt an RSE licensee from giving notice to its beneficiaries.

6. Can an RSE licensee apply for an extension to the 28 day timeframe for providing notice to beneficiaries?

In exceptional circumstances such as a merger, consideration may be given to deferring the RSE licensee’s obligation to give notice to beneficiaries.  

RSE licensees can apply by submitting their request in writing, providing clear reasons for the request before the expiration of the 28 days. Their request must be sent to BOTH their responsible supervisor at APRA and to ASIC through the ASIC Regulatory Portal. ASIC will be the lead agency in considering requests and will consult with APRA prior to making a decision.

RSE licensees should make their request early in the period leading to expiration of 28 days when submitting their request as they will need to provide notice within the 28 day timeframe if no extension is provided.

7. Do RSE licensees need to send the notice to beneficiaries who are in the product at the date of the notice or at the date the performance test was conducted? 

The notice is to be sent to beneficiaries who (i) hold an interest in the product at the date APRA provides its determination to the RSE licensee and (ii) continue to hold the product at the date the notice is sent.

8. Can new beneficiaries hold a product that fails the performance test for a second consecutive year? (NEW)

Products that fail the performance test in two consecutive years cannot accept any new beneficiaries into the product until they pass a future performance test. 

RSE licensees are expected to have administrative processes in place to ensure they comply with their legislative obligation to prevent new beneficiaries from holding the product from the beginning of the day after the second fail notification is received.  Any contributions received from or on behalf of persons who were not holding the product on the day the second notification is received will need to be returned. 

APRA expects RSE licensees of MySuper products that failed last year’s performance test to be engaging closely with their employer-sponsors, promotors and other key stakeholders to ensure they are aware that the product may be closed to new beneficiaries if the product fails this year’s performance test. 

9. Are RSE licensees required to consider their performance test result in their annual outcomes assessment(s) under section 52(9) of the SIS Act? 

Yes. In undertaking the annual outcomes assessment, an RSE licensee must have regard to their performance test result.  

10. Will APRA publish the performance test values for each MySuper product in the annual heatmap publication? 

APRA intends to publish the performance test values as part of its MySuper product heatmap.

11. What was the benchmark representative administration fees and expenses (RAFE) used for the 2020-21 performance test (MySuper)?

The benchmark RAFE used for the 2020-21 performance test was 0.3286%.

Technical

 

1. APRA has been given flexibility under the Regulations to combine the performance of two or more products for the purpose of the performance test. How does APRA intend to use that flexibility?

APRA has developed a series of principles to guide combining MySuper product performance histories. On 16 August 2021, APRA published an Information Paper outlining the principles and approach to combining investment performance for the purposes of the performance test.

2. How will a product be assessed when there has been a significant change in the structure of the product over time, for example changing from a single strategy to a lifecycle strategy?

The performance of a product must be assessed over the lookback period of the performance test or since the product first began reporting investment performance data to APRA, if later. Therefore, if a product has changed from a single strategy to a lifecycle strategy, the performance under both structures is required to be assessed under the performance test. For further information, refer to APRA’s Information Paper published on 16 August 2021, outlining how the performance test will be applied for products that have had a change in their structure over the lookback period.

3. Will APRA combine (or “stitch”) history in the performance test where APRA has granted a new MySuper product authorisation on the basis of material goodwill? (NEW)

Where APRA grants a new MySuper product authorisation under the material goodwill provision, APRA is satisfied that the previously authorised MySuper product is similar to the new MySuper product under s 29TA of the SIS Act. Accordingly, APRA will in such circumstances combine the performance history of both products for the purpose of the performance test. For further information, refer to APRA’s Information Paper on combining performance histories for the purposes of the performance test.

4. What administration fees are assessed in the performance test?

The performance test assesses the administration and advice fees, costs and taxes charged to a representative member with a $50,000 account balance over the last financial year. This data is reported to APRA in Reporting Form SRF 702.0 Investment Performance.

5. What performance history is assessed under the test? If a MySuper product has less than 5 years’ history, will it be assessed?

The performance test assesses the investment performance of a product over an eight year time horizon (or a seven year time horizon in 2021 only). If a product has a performance history of less than five years, the product has met the requirements of the performance test, unless APRA issues a determination under regulation 9AB.10(4) to calculate a performance measure for the product.

6. Which data items from APRA’s reporting forms are used to calculate a product’s performance test result?

The data used in the performance assessment is reported to APRA under the Financial Sector (Collection of Data) Act 2001 through the following forms and available in APRA publications:
 

Data Item

Data Source

APRA publication

Net Investment Return

Reporting Form SRF 702.0 Investment Performance – Item 4.1

Quarterly MySuper Statistics – Table 2a & Table 2b

Strategic Asset Allocation

Reporting Form SRF 533.0 Asset Allocation – Item 1

Quarterly MySuper Statistics - Table 1a & Table 1b

Total Investments

Reporting Form SRF 533.0 Asset Allocation – Item 2.1

Quarterly MySuper Statistics - Table 1a & Table 1b

Administration fees

Reporting Form SRF 702.0 Investment Performance – Item 2.1

Quarterly MySuper Statistics – Table 2a & Table 2b

Indirect cost ratio administration costs

Reporting Form SRF 702.0 Investment Performance – Item 2.2

Quarterly MySuper Statistics – Table 2a & Table 2b

Administration-related tax expense / benefit

Reporting Form SRF 702.0 Investment Performance – Item 2.4

Quarterly MySuper Statistics – Table 2a & Table 2b

Advice fees

Reporting Form SRF 702.0 Investment Performance – Item 3.1

Quarterly MySuper Statistics – Table 2a & Table 2b

Indirect cost ratio advice costs

Reporting Form SRF 702.0 Investment Performance – Item 3.2

Quarterly MySuper Statistics – Table 2a & Table 2b

Advice-related tax expense / benefit

Reporting Form SRF 702.0 Investment Performance – Item 3.4

Quarterly MySuper Statistics – Table 2a & Table 2b

 

 

For more information

Email MemberOutcomes@apra.gov.au or mail to

Senior Manager Member Outcomes
Australian Prudential Regulation Authority
GPO Box 9836, Sydney NSW 2001