The Australian Securities and Investments Commission (ASIC) has instructed some super funds which failed APRA’s annual performance test for a second time last year to be more member-centric in their performance communications.
Four products failed the test for a second consecutive time in 2022, including Australian Catholic Superannuation and Retirement Fund’s LifetimeOne, EISS Super’s Balanced (MySuper), BT Super’s MySuper, and AMG Super’s AMG MySuper.
ASIC said that it had reviewed member communications from trustees that failed the test and examined whether performance test communications reflected its expectations as set out in Report 729 Review of trustee communications about the MySuper performance test.
While acknowledging that improvements have been made, the regulator said that trustees being more member-centric in their approach was “an area of industry weakness and a common conclusion when ASIC reviews member communications”.
“The performance test supports transparency of superannuation product performance so members can make informed financial decisions for their retirement,” said ASIC commissioner Danielle Press.
“Trustees that fail the performance test need to get the balance right in their communications — they need to be transparent and factual about the performance of the failed product.”
Ms Press said that ASIC’s review concluded that trustees took into account its guidance and were complying with the mandatory disclosure obligations to notify their members of the failure, and also had good processes to ensure that no new members joined the closed products.
“However, we found that some trustees need to design and deliver performance communications with their current members in mind,” she added.
The review found that some trustees took a reactive approach to performance test communications or significant events such as mergers and did not have cohesive communications strategies in place.
“This meant that their communications to members were inconsistent or lacked clarity. To ensure that members understand the impact of relevant changes, trustees should consider from a members’ perspective what communication members will receive and when,” ASIC said.
Other areas for improvement highlighted by the regulator included:
- Providing consistent messaging about performance across the fund website.
- Ensuring that communications about short-term performance, products and mergers are balanced and don’t undermine the fact that the product failed the test.
- Providing clear call centre transcripts for staff to discuss performance failure or product closure and related options with members.
ASIC noted that it had written to the trustees that appeared likely to fail a second time prior to its review and laid out expectations about updating product disclosure statements and issuing significant event notices.
“ASIC observed that trustees interpreted these obligations differently and provided feedback to them on this and other areas for improvement,” the regulator said.
Since ASIC undertook its review, Australian Catholic Superannuation, which failed the performance test last year, has merged with UniSuper.
“As the performance test expands to trustee-directed products, I strongly encourage trustees to assess their approach to member communications, reflecting on the suggested areas for improvement,” Ms Press stated.
“Trustees should bear in mind ASIC’s expectations for balance, prominence, and clarity in their performance communications to members.”
ASIC said that it would continue to monitor underperformance notifications and other communications by trustees that fail the test and, where a failure to comply with disclosure obligations is identified, it will consider regulatory action if appropriate.
