Australia’s superannuation performance test does not apply to retirement-phase products, leaving retirees exposed to underperforming funds with limited transparency or protection.
The annual performance test, administered by the Australian Prudential Regulation Authority (APRA), assesses whether superannuation products in the accumulation phase are delivering acceptable returns against benchmarks.
Products that fail the test for two consecutive years are prevented from accepting new members and are publicly identified through the ATO’s YourSuper comparison tool.
However, once a member retires and shifts into a pension or retirement-phase product, those safeguards disappear – even when the retirement product is effectively the same as the accumulation option.
This regulatory gap has been highlighted by Super Consumers Australia (SCA), which warns retirees may unknowingly remain in poorly performing funds with no clear way to compare outcomes or assess value.
SCA analysis suggests retirees trapped in underperforming retirement products could lose as much as $205,000 over the course of their retirement due to lower returns and fees.
The report, Securing Australia’s Retirement: It’s time to protect retirees from dud investment options, found the current performance test only applies before retirement and provides no warning to retirees if the same product fails once it moves into the pension phase.
SCA CEO Xavier O’Halloran said the Federal Government’s review of the performance test must extend protections into retirement to prevent Australians being locked into poor-quality products.
He warned that without transparency and accountability, retirees will continue to suffer reduced retirement incomes simply because there is no quality testing in place once they stop working.
SCA Deputy CEO Dr Katrina Ellis said it was unreasonable that safeguards apply to a 64-year-old worker but vanish the moment they retire.
She said retirees deserve the same protections as people still accumulating super, warning that without reform, hundreds of thousands of dollars in retirement income could be lost.
The report identified consistent underperformance across retirement products offered by several major funds, including AMP, Russell Investments, Colonial First State and REST, based on APRA data with sufficient long-term performance history.
SCA noted that products without a full 10-year performance record were excluded from the analysis.
SCA found nearly three-quarters of Australians support extending the performance test to retirement products, while more than four in five want greater transparency.
National Seniors Australia survey data reinforces this, showing retirees rank strong returns, low fees and stability as their top priorities.
National Seniors Australia agrees the time has come to introduce a retirement-phase performance test.
National Seniors Australia
