APRA's 2026 Super Test: How to Identify and Exit Underperforming Funds

The Australian Prudential Regulation Authority (APRA) has released the results of its 2026 Superannuation Performance Test and Comprehensive Product Performance Package (CPPP), reviewing 547 superannuation products representing 61 per cent of APRA-regulated member benefits [1]. In total, 12 products failed to meet legislated performance standards: one default MySuper product and 11 platform Trustee Directed Products (TDPs) [1]. For long-term wealth accumulators, sub-par net returns and persistent platform fee drag significantly reduce terminal balances at retirement. Understanding how the APRA test operates and navigating the practical steps to exit an underperforming option ensures capital continues to compound efficiently.

The 2026 APRA Performance Test: Benchmarks and Architecture

The annual performance test was established under the Australian Government's Your Future, Your Super reforms to hold registrable superannuation entity (RSE) licensees accountable for member outcomes [2]. The statutory assessment measures two distinct limbs: net investment performance over a rolling 10-year historical evaluation window, and fee competitiveness assessed on representative administration fees and expenses for the most recent financial year [3].

Under the investment limb, a product's actual net returns are benchmarked against an index-tailored portfolio reflecting the fund's declared strategic asset allocation (SAA) [2]. Under the fee limb, the product's representative administration fees and costs are assessed against the median fee charged for comparable market offerings [2]. A product fails the test if its combined net return underperforms the tailored benchmark by more than 0.50% per annum (50 basis points) [2].

In the 2026 assessment, APRA evaluated 50 MySuper options, 356 non-platform TDPs, and 141 platform TDPs [1]. While all 356 non-platform TDPs met or exceeded required thresholds, one MySuper product and 11 platform TDPs failed the benchmark, underscoring ongoing structural challenges within complex choice platforms [1].

The Hidden Cost of Choice Platforms vs MySuper Defaults

A central insight from APRA's 2026 Comprehensive Product Performance Package is the divergence in fee compression across product structures [1]. Default MySuper options have experienced widespread fee reductions due to heightened regulatory scrutiny and fund consolidation. In contrast, platform choice products—often sold through wrap platforms—frequently remain significantly more expensive [1].

Platform products frequently incur multiple layers of costs, including custodial platform administration fees, trustee operational levies, and individual investment management charges. APRA's analysis confirmed that 2026 failures were primarily driven by inadequate investment returns relative to benchmarks rather than isolated fee spikes, showing that higher gross fee burdens frequently impede net after-fee performance [1].

Regulatory Consequences for Consecutive Test Failures

The Superannuation Industry (Supervision) Act 1993 (Cth) enforces escalating regulatory sanctions for funds failing the annual benchmark [2]:

• First-Year Failure: Trustees must provide written notification to all members within 28 days of the determination, explicitly disclosing the underperformance and advising members to review comparative options via the Australian Taxation Office (ATO) [2]. The trustee must develop an actionable remediation plan or initiate an orderly transfer of member balances [3].
• Second Consecutive Failure: If an option fails for two consecutive years, the RSE licensee is legally prohibited from accepting new members into that specific product from the day following notification [1], [2]. In the 2026 cycle, five platform TDPs across two trustees breached this threshold and are now closed to new business [1].

Checklist: Benchmarking and Exiting Without Tax or Insurance Traps

Members seeking to review an existing fund can follow a structured four-stage evaluation process to prevent administrative losses, unintended insurance cancellations, or unexpected tax events:

• 1. Benchmark via the ATO YourSuper Tool: MySuper default funds can be reviewed by logging into myGov and navigating to the ATO online portal, which provides access to the YourSuper comparison tool [4]. The tool displays net returns, annual administration fees, and official APRA pass/fail results for all registered MySuper products [4].
• 2. Audit Platform Choice Holdings Manually: Because the ATO YourSuper comparison tool is restricted to default MySuper products, members invested in platform TDPs must review their Product Disclosure Statement (PDS) and APRA Choice data directly to evaluate long-term multi-asset net returns against asset-weighted benchmarks [4].
• 3. Secure Replacement Insurance Before Rolling Over: Group life, Total and Permanent Disability (TPD), and income protection covers automatically cease when an account is closed [5]. If replacement cover is required, members should confirm acceptance in the receiving fund prior to requesting an exit rollover, ensuring pre-existing medical conditions or employment changes do not compromise insurability [5].
• 4. Review Capital Gains Tax (CGT) Realisation on Platform Wrap Accounts: In pooled superannuation funds, unrealised capital gains are provisioned at the fund level into unit prices. In contrast, exiting individual platform shares, ETFs, or wrap model portfolios crystalises a disposal event for tax purposes; while complying superannuation funds qualify for a one-third CGT discount on assets held over 12 months under section 115-100(b) of the Income Tax Assessment Act 1997 (reducing the effective tax rate on assessable capital gains from 15% to 10%), liquidating holdings to switch funds can trigger an immediate tax deduction that diminishes the rollover balance [6].

Regularly reviewing product benchmark status, investment structures, and ongoing platform expenses ensures that retirement savings remain positioned in cost-effective, high-performing vehicles designed for long-term compound growth.

This article contains general educational information only and does not constitute personal financial, legal, or tax advice. Please consult a licensed professional before making any financial decisions.