The results of the 2022 performance test were published by the Australian Prudential Regulation Authority (APRA) on 31 August 2022. Only MySuper products were tested this year, after the extension of the test to certain other products was suspended by the government.
Five products failed this year, four of those for the second consecutive time. This means the following products are now banned from accepting new members from 31 August 2022:
Employers whose default product is one of these four products should take action urgently as no new employees can be defaulted into these products until they pass another performance test in the future.
There will be more information, including details of each MySuper product’s test result, in the next edition of APRA’s MySuper Heatmap, due in December 2022. In the meantime, all employers should continue to maintain their focus on the governance and oversight of their default fund, particularly considering the current level of industry disruption from fund mergers.
On 7 September 2022 the government announced a review of the “Your Future Your Super” (YFYS) changes including the performance test. While the government has committed to retaining the test for MySuper products and reinstating it for certain choice products, the review will consider how effective the test has been in improving trustee performance, whether there have been any unintended consequences arising from the test, and what issues arise in extending it to other superannuation products.
Employers should include monitoring of developments in their oversight and governance of their default fund arrangements.
The minimum employer contribution rate under the Superannuation Guarantee (SG) increased to 10.5 per cent from 1 July 2022 and will increase again to 11 per cent from 1 July 2023 and 11.5 per cent from 1 July 2024. From 1 July 2025 it will level out at 12 per cent.
Employers who currently contribute a greater amount than the SG level for employees or who have a matching arrangement in place (with higher employer contributions if an employee chooses to contribute) should begin to consider what changes, if any, should be made to these arrangements once the SG reaches 12 per cent.
The new Australian government took a number of policies to the recent Federal election that relate to the SG. These include considering aligning the frequency of payment of superannuation and wages, a crackdown on unpaid superannuation contributions and investigating the possibility of raising the SG to 15 per cent. The Treasurer has also stated that the government will consider payment of the SG on paid parental leave when the Budget circumstances permit.
None of these measures are yet in place. However, employers should continue to monitor developments in these areas.
The government’s review of the YFYS changes will also include the stapling measure. Stapling was intended to prevent the creation of unintended multiple superannuation accounts, leading to members being subjected to multiple sets of fees and potentially unneeded duplicate insurance cover.
The government is keen to understand the effectiveness of stapling including the extent to which employees are choosing their preferred fund or having a default fund account opened for them. Questions to be considered by the review include how the implementation of stapling has changed onboarding, software and payroll processes for new employees and what the actual or likely impact is of stapling on insurance coverage.
Employers should monitor the progress of this review. In the meantime, the existing stapling laws remain in force. Employers should ensure they are complying with the requirements to check with the ATO whether each new employee who does not choose a fund has a stapled fund, and to pay contributions to that stapled fund if so.
The information in this update is general information only and does not take into account your objectives, financial situation or needs. It is not personal advice. You should consider obtaining professional advice about your particular circumstances before making any financial decisions based on the information in this update.
