Outcomes assessment under s. 52(9) of the Superannuation Industry (Supervision) Act 1993 - frequently asked questions

Yes. In June 2021 an amendment was made to s. 52(9) of the SIS Act that requires an RSE licensee to have regard to the annual performance test when completing their annual outcomes assessment. 
These provisions apply to MySuper products and to certain choice products, i.e. trustee-directed products (TDPs).

Section 52(9)(a)(i) and (ii) of the SIS Act and SIS regulation 4.01A require an RSE licensee to compare their MySuper product and relevant choice products to the performance test benchmarks in their annual outcomes assessment.

For the purposes of the comparison of the MySuper product under s. 52(9)(a)(i) of the SIS Act, APRA considers this would involve an RSE licensee determining how their MySuper product compares with all MySuper products (i.e. both single strategy and lifecycle products) with respect to fees and costs, returns, level of investment risk and other factors specified in SPS 515 and in terms of out-performing or underperforming against the performance test benchmarks.
 
In addition to the requirements of s. 52(9)(a)(i) and (ii) and SIS regulation 4.01A, s. 52(9)(a)(iv) of the SIS Act requires an RSE licensee to have regard to the latest performance test determination (if any) made by APRA for their product, i.e., the RSE licensee must consider the most recent pass or fail result.

APRA’s view is the outcomes assessment requires an RSE licensee to consider the most recent pass or fail result and how that effects the RSE licensee’s ultimate conclusion as to whether the financial interests of the beneficiaries holding the product are being promoted.

As noted in the Explanatory Memorandum to the Treasury Laws Amendment (Your Future, Your Super) Bill 2021, an RSE licensee of a product that fails the annual performance test will find it very difficult to show that the product is promoting the financial interests of beneficiaries in their annual outcomes assessment.¹

Footnote:

¹ Paragraph 2.44, Revised Explanatory Memorandum, Treasury Laws Amendment (Your Future, Your Super) Bill 2021.

The obligation to make a determination under s. 52(9) of the SIS Act applies to an RSE licensee in respect of the MySuper products and choice products offered by the entity, on an annual basis. Where there is a change of RSE licensee (i.e. one RSE licensee retires and a new one is appointed to the fund), the new RSE licensee may choose to adhere to the same outcomes assessment cycle followed by the retiring RSE licensee or adopt another cycle if this is more appropriate for the RSE licensee’s business operations. 

Where an RSE licensee transfers members’ benefits from the fund (the transferring fund) to another fund (the receiving fund) by way of SFT before the next assessment is due, the transferring RSE licensee is not required to make and publish the determination in respect of the products that they no longer offer. Rather, the receiving RSE licensee has the obligation to undertake the outcomes assessment for the existing product into which the members’ benefits are transferred. If the members’ benefits are transferred into a stand-alone product in the receiving fund, an RSE licensee may consider whether it is in the members’ interests to continue the same outcomes assessment cycle established in the transferring fund or adopt the cycle of the receiving fund.

In making the determination under s. 52(9) of the SIS Act, APRA expects an RSE licensee would use the heatmap as an additional source of data to assess the relative performance of their product(s) and to validate the RSE licensee’s determination.

As APRA did not publish heatmaps using data for financial year 2022/2023, RSE licensees are unable to use a current heatmap publication in undertaking the FY23 outcomes assessment.
 
In place of the 2023 heatmaps, APRA published performance test data, including the performance test metric and investment performance and administration fee components of the performance test for each MySuper and TDP, and an Insights paper on 2023 performance test, which are available on the APRA website at Annual superannuation performance test.

APRA expects RSE licensees to consider the expanded performance test 2022/2023 results publication and the Insights paper when completing the FY23 outcomes assessment.
  
In 2024, APRA will align the timing of the performance test and heatmap publications. A comprehensive transparency package covering investment returns, fees and performance test metrics will be published soon after the annual 2024 performance test.

Sections 52(9)(b) and 52(9)(c) of the SIS Act requires an RSE licensee to publish a summary of the assessments and comparisons on which the financial interests determination is based on the RSE website within 28 days after the determination is made. 

The summary is designed to facilitate improved accountability of the RSE licensee’s decision-making and provide better understanding of the context in which the RSE licensee made their determinations. 

In the summary, an RSE licensee is expected to:

- include an explanation of the comparisons to other superannuation products per s. 52(10) and s. 52(10A) of the SIS Act (fees and costs, returns, investment risk etc);
- clearly identify the products used by the RSE licensee to undertake the required comparisons; and
- explain how the RSE licensee concluded that the factors in s. 52(11) and paragraph 23 of Prudential Standard SPS 515 Strategic Planning and Member Outcomes have or have not promoted the financial interests of the RSE’s beneficiaries.

It is open to an RSE licensee to include case studies, examples or other visual aids in the summary if they are likely to assist a reader to understand the financial interests determination or the assessments or comparisons on which the determination is based. Any tables, diagrams or graphs used would have appropriate explanation (including a clear statement of any assumptions) and accurately reflect underlying data. They must not be misleading or deceptive.

An RSE licensee is expected to refrain from including additional substantive content in the summary that is not contained in the outcomes assessment, particularly where the information could mislead a reader about the performance of the product. Examples include comparisons of the product to internal product return benchmarks, industry awards, customer service ratings or promotional messaging. 

An RSE licensee must include the most recent summary of the outcomes assessment under s. 52(9) that is, or will be, published on the RSE website with the notice of the RSE’s annual members’ meeting required under s. 29P(2) and s.29P(3) of the SIS Act.

An RSE licensee may provide members with details for how the member can access the summary from the RSE website with the notice instead of providing a copy of the summary. The details must include an appropriately described website hyperlink to the location on the RSE website where the summary is published.

A prudent RSE licensee would alert members and other stakeholders via email alert or media release about the publication of the member outcomes summary when it first becomes available on the RSE’s website. As noted in Prudential Practice Guide SPG 516 Business Performance Review, the summary would be easily accessible on the fund website and in a logical location.

The outcomes assessment must be undertaken within 12 months of the previous assessment. The results of the outcomes assessment must be considered as part of the annual Business Performance Review, required under SPS 515.

Prudential Standard SPS 515 Strategic Planning and Member Outcomes requires that the business performance review have regard to the outcomes assessments under s. 52(9) of the SIS Act. APRA expects an RSE licensee would align their outcomes assessment and business performance review cycles so that the RSE licensee is using up-to-date assessments when undertaking the business performance review. APRA considers that a gap of more than six months between the timing of the outcomes assessment and the business performance review would run the risk of not enabling an up to date business performance review and optimising value from the process.

Prudential Standard SPS 515 Strategic Planning and Member Outcomes requires that the business performance review to be undertaken on an annual basis. Accordingly, the business performance review must be undertaken within 12 months of the previous business performance review. In practice, a number of RSE licensees have brought forward the business performance review to align with the RSE licensee’s business planning cycle. Therefore, the 12 month cycle will vary across RSE licensees.

Where an RSE licensee seeks to delay their business performance review, and the contemplated delay would mean that an RSE licensee would not complete their business performance review within 12 months of the last review, the RSE licensee must apply to APRA for an adjustment to the timing requirements of the business performance review in Prudential Standard SPS 515 Strategic Planning and Member Outcome. Alternatively, an RSE licensee may bring forward the business performance review, in order to align timing and reset their 12 month cycle.

APRA considers that the legislation provides an RSE licensee with discretion as to which 12 month period they apply for the purposes of meeting the annual outcomes assessment requirements under s. 52 of the SIS Act. The 12 month period could be the calendar year, financial year, income year for the RSE licensee or any other 12 month period.

APRA expects an RSE licensee would be in a position to make the outcomes assessment determination within two months of the publication of the relevant APRA statistics. APRA expects the RSE licensee would undertake a determination at the same time for each MySuper product and choice product offered.

Yes. An RSE licensee must make a determination for each of their choice products under s. 52(9)(a) of the SIS Act, including having regard to the factors in s. 52(11).  

While the SIS Regulations do not define ‘a comparable choice product’ for the purpose of undertaking the required comparison component of the outcomes assessment under ss. 52(9)(a)(ii) and 52(10A) of the SIS Act, APRA expects an RSE licensee would undertake relevant benchmarking and comparison, including the use of appropriate peer groups, to assist it in assessing the relative performance of their choice products. 

APRA appreciates the possible complexities in undertaking the outcomes assessment in respect of choice products. Section 52(9)(a)(ii) of the SIS Act and SIS regulation 4.01A require an RSE licensee to compare their choice products that are trustee-directed products to the performance test benchmarks in their annual outcomes assessment.

In the absence of prescribed ‘comparable choice products’ in the SIS Regulations, the approach taken for choice products in comparing the factors listed in section 52(10A) of the SIS Act, is largely at the discretion of RSE licensees. For this reason, APRA’s focus will be on understanding the methodology underpinning the assessment and, where appropriate, providing challenge.

APRA considers that in making a determination, the RSE licensee would undertake an assessment for each investment option offered under the product (at the option level).  

As s. 52(9) of the SIS Act requires a product determination, APRA expects an RSE licensee to bring together option level assessments in order to make the determination at the product level. The methodology relied on to do this is at the discretion of the RSE licensee. 

Section 52(6) of the SIS Act and SPS 530 together require an RSE licensee to formulate an investment strategy for each option offered to beneficiaries, document how it has given regard to each of the factors in s. 52(6) when formulating the strategy for each option and, on an annual basis, review each investment strategy against its investment objectives. 
 
APRA considers that an RSE licensee may draw upon analysis undertaken in complying with the above-mentioned requirements when assessing, for the purpose of s. 52(11)(b), whether the investment strategies for the investment options available through the product, including the level of investment risk and the return target, are appropriate to those beneficiaries. 

Investment fees charged to members are determined by the investment choice selected by the member, and can be compared against the investment fees of similar investment options.  

The administration fee charged to members can also vary depending on the investment option selected by the member (particularly with wrap platform products).  Whilst this adds complexity to the benchmarking of administration fees, administration fees are considered a critical component of the outcomes assessment. APRA considers it appropriate for an RSE licensee to compare administration fees at the investment option level, and also at the product level. Whilst the approach taken to compare administration fees is largely at the discretion of the RSE licensee, APRA will seek to validate the RSE licensee’s approach.

No. An RSE licensee must undertake the comparison against all MySuper products (i.e. both single strategy and lifecycle products). 

Where an RSE licensee offers a single strategy MySuper product, when comparing against a lifecycle product, APRA expects the RSE licensee to select the lifecycle stage that is most appropriate to its single strategy product having regard to either the age of the members holding the RSE licensee’s single strategy product or the risk profile of the single strategy product.

Where an RSE licensee offers a lifecycle MySuper product when comparing against:

- a single strategy product, APRA expects the RSE licensee to select a single stage of the lifecycle product that most closely reflects the risk profile of the single strategy product. 
- other lifecycle products, APRA expects the RSE licensee to compare each lifecycle stage against appropriate stages of other lifecycle MySuper products having regard to either the age of the members in the lifecycle stage or the risk profile of the lifecycle stage.

Under s. 52(9) of the SIS Act, an RSE licensee must make the determination at the product level. However, APRA considers that in making this determination, the RSE licensee would undertake the assessment for each lifecycle stage of the product which are then brought together in order to make the determination at the product level using their own methodology. 

In developing its approach, APRA encourages RSE licensees to consider the lifecycle product-level methodology in Part 9AB of the SIS Regulations   which weights the performance in each lifecycle stage based on the value of the investments in the lifecycle stage over time.

Yes. All factors must be assessed for MySuper and choice products. However, in the case of choice products, where a factor is not relevant (e.g. no insurance is offered as part of that product), the extent of the assessment would be an explanation as to why the factor is not relevant.   

MySuper products

For the purposes of the MySuper product comparison required under s. 52(10) of the SIS Act, paragraph 22 of Prudential Standard SPS 515 Strategic Planning and Member Outcomes (SPS 515) requires the RSE licensee to use the methodology set out in Reporting Standard SRS 700.0 Product Dashboard and Reporting Standard SRS 702.0 Investment Performance (SRS 702.0).

Although SRS 702.0 was revoked on 1 December 2023, APRA expects RSE licensees to continue to use the methodology outlined in SRS 702.0. APRA publishes statistics using data sourced from Reporting Standard SRS 705.0 Components of Net Return utilising the methodology set out in SRS 702.0 in Table 4a of the new Quarterly Superannuation Product Statistics.

APRA notes that the last submission for SRF 702.0 forms was for the period ending 30 September 2023 and that relevant quarterly MySuper data sourced from SRS 702.0, is published to 30 September 2023 at Quarterly superannuation statistics | APRA

Choice products

Whilst the methodology is largely prescribed for MySuper products, an RSE licensee must determine an appropriate approach for its choice products, including the methodology and data necessary to make the determination under s. 52(9).

As noted in FAQ No. 1, an RSE licensee is required to consider the performance test methodology in their outcomes assessment for choice Trustee Directed Products subject to the 2023 performance test.

APRA’s superannuation data transformation project has expanded the data collection for the choice sector and publishes some of this expanded data in the Quarterly Superannuation Product Statistics (QSPS). APRA expects an RSE licensee to make use of the QSPS, as part of a comprehensive suite of internally and externally sourced data.

APRA publishes the historical net investment returns and strategic asset allocation for all multi sector choice products and plans to expand the publication to include single sector and retirements products.

APRA will seek to understand the RSE licensee’s methodology for undertaking the assessment, including the RSE licensee’s selection of peer groups for comparison purposes for choice products, and the benchmarks used in undertaking its outcomes assessment.