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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: 27 October 2021.

Performance Test

 

The performance test applies from 1 July 2021 to MySuper products, and from 1 July 2022 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.

6. What reporting forms will be used for the 2022 performance test?

APRA currently collects strategic asset allocation and investment performance data on Reporting Form SRS 533.0 Asset Allocation (SRS 533) and Reporting Form SRS 702.0 Investment Performance (SRS 702) for MySuper products only. APRA will be administering the performance test for TDPs in 2022 and therefore will need to use data collected on Reporting Form SRS 550.0 Asset Allocation (SRS 550), Reporting Form SRS 705.0 Components of net return (SRS 705) and Reporting Form SRS 705.1 Investment Performance and Objectives (SRS 705.1).

APRA will be collecting historical SRS 550 and SRS 705.1 data for both MySuper products and TDPs in early 2022. Once APRA has reviewed the historical data collected through SRS 550 and SRS 705.1, APRA will determine which reporting forms will be used in administering the performance test for MySuper products next year.

7. When will RSE licensees be notified of their 2022 performance test results and what detail will be included?

APRA will publish the 2022 performance test results at the end of August 2022 once the performance test has been undertaken. As the timing between the running of the performance test and the legislated timeframe for notification and publication are short, APRA’s ability to provide any results in advance of publication is limited. However, provisional results will be provided to RSE licensees test ahead of publication where a product appears likely to fail the test.

General

 

1. When will APRA notify RSE licensees of their MySuper product’s performance test result?

APRA will notify each RSE licensee of their MySuper product’s performance test result on 30 August 2021.

2. Will APRA publish the results of the performance test?

Yes. APRA will publish the results of the performance test on the APRA website on 31 August 2021, after all RSE licensees have been notified of their result.

For each MySuper product a “Pass” or “Fail” result will be published; the value will not be disclosed.

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 members who are in the MySuper product at the date of the notice or at the date the performance test was conducted?

The notice is to be sent to beneficiaries that hold an interest in the product at the date APRA provides its determination to the RSE licensee (30 August 2021), who continue to hold the product at the date of the notice.

8. 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.  

 

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, 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. 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.

4. 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.

5. 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