MySuper Regulation — How APRA Regulates Default Super Funds

MySuper products are regulated by the Australian Prudential Regulation Authority (APRA) under the Superannuation Industry (Supervision) Act 1993 (SIS Act) and the Superannuation (Industry) Supervision Regulations 2021. APRA’s regulatory framework aims to ensure that default super funds are well-governed, low-cost, and perform for members.

How APRA Authorises MySuper Products

Before a fund can offer a MySuper product, the trustee must apply to APRA for authorisation. APRA assesses:

• Trustee fitness: Whether the board and key executives meet the “fit and proper” standard
• Product design: MySuper must be a single diversified option or a lifecycle option — not a complex product with multiple embedded choices
• Fee structure: Fees must be transparent and comply with the MySuper fee disclosure requirements
• Insurance: The product must provide or make available at least death cover (life insurance) — TPD and income protection are common but not always mandatory

APRA can revoke a MySuper authorisation if a fund consistently fails regulatory expectations.

Annual Performance Test

From 2021, APRA conducts an annual performance test of every MySuper product. The test compares 8-year net investment returns against a benchmark constructed using the fund’s actual asset allocation and market index returns.

Consequences of failure:

1. First failure: Mandatory member notification within 28 days
2. Second consecutive failure: Product closed to new members

See MySuper Performance Test for full details.

The Heatmap

APRA publishes an annual superannuation heatmap showing all MySuper and some trustee-directed products ranked by:

• Investment performance (relative to benchmark)
• Fees and costs
• Sustainability of member outcomes

The heatmap uses a red-to-green colour scale — red indicates poor outcomes, green indicates strong performance. It is designed to create transparency and reputational pressure on underperforming trustees.

See APRA Heatmap Guide.

Trustee Obligations Under MySuper

Trustees of MySuper products must:

1. Act in members’ best financial interests — the Superannuation Legislation Amendment (Trustee Obligations and Assurance) Act 2021 strengthened this duty
2. Conduct an annual member outcomes assessment — comparing their MySuper product against alternatives and benchmarking member outcomes
3. Publish a business performance review explaining how the product serves member interests
4. Meet the scale test — demonstrate that the fund is of sufficient scale to serve members efficiently (small funds must justify their continued independent operation)
5. Comply with the Retirement Income Covenant — from 2022, trustees must formulate a retirement income strategy for members approaching and in retirement

What Isn’t Regulated Under MySuper

• Investment performance — APRA can test and notify, but cannot dictate investment strategy
• Investment returns — past returns are monitored but APRA cannot guarantee or mandate returns
• Individual member outcomes — APRA focuses on systemic fund-level outcomes, not individual complaints (these go to AFCA)
• Choice (non-MySuper) products — while APRA regulates fund trustees generally, the specific MySuper performance test and fee cap rules only apply to MySuper products

Who Can Members Complain To?

• APRA: For systemic concerns about fund governance and safety (not for individual disputes)
• AFCA (Australian Financial Complaints Authority): For individual disputes — unpaid benefits, insurance claims, fund errors
• ASIC: For consumer protection matters relating to advice or misleading conduct
• ATO: For SG non-payment by employers

Frequently Asked Questions

Who regulates MySuper products — is it APRA or ASIC? Both regulators play a role, with different responsibilities. APRA (Australian Prudential Regulation Authority) supervises fund trustees, financial soundness, governance, and the performance test. ASIC (Australian Securities and Investments Commission) focuses on consumer protection, disclosure standards, product design obligations, and licensing of financial advisers. In practice, super fund regulation sits primarily with APRA for prudential matters and ASIC for conduct and disclosure matters.

What happens if a super fund trustee breaches its obligations? APRA can take a range of enforcement actions depending on severity: issuing formal directions, conditions on licences, enforceable undertakings, or civil penalties through the courts. In serious cases, APRA can remove and replace the trustee board or appoint an administrator. ASIC can also pursue civil and criminal action against trustees for misleading conduct or breaches of disclosure obligations.

What is the “best financial interests” duty and what does it require trustees to do? Under the Treasury Laws Amendment (Your Future, Your Super) Act 2021, trustees must act in members’ best financial interests — not merely “best interests.” The distinction means trustees must be able to demonstrate that expenditure and decisions are financially beneficial for members, not just generally in members’ interests. This has increased scrutiny on fund spending on marketing, sponsorships, and non-financial activities. Trustees must now keep records proving their decisions satisfy this test.

Can APRA force a super fund to close? Yes — APRA can revoke a fund’s APRA licence and MySuper authorisation. Revocation effectively forces the fund to transfer members and assets to another regulated fund. APRA can also require a fund to exit the MySuper market (close to new members) after two consecutive performance test failures. In practice, most regulatory exits occur through supervised mergers rather than forced closures.

What is the difference between APRA supervision and ASIC supervision of super funds? APRA supervises fund-level financial strength, governance, and member outcomes (the “prudential” side). ASIC supervises how funds interact with consumers — disclosure documents, product design, advertising, and financial advice licensing (the “conduct” side). A fund can comply with APRA’s requirements while still breaching ASIC’s rules (e.g., by having misleading product disclosure), and vice versa. Members can complain to AFCA about individual disputes, which is separate from both regulators.

What does the Retirement Income Covenant require fund trustees to do? From 1 July 2022, all APRA-regulated funds (not just MySuper products) must formulate, review, and give effect to a retirement income strategy for their members approaching and in retirement. The strategy must address how the fund will assist members to balance three objectives: maximising expected retirement income, managing longevity risk (the risk of outliving savings), and providing flexible access to funds. Trustees must publish their strategy on their website and update it regularly.

For more: MySuper Explained, APRA Heatmap, Your Future, Your Super Reforms. For advice on your super, speak with a licensed financial adviser via MoneySmart.