Annual Performance Assessment

Our MySuper Balanced (default) product has not met the performance requirement in the APRA Annual Performance Assessment for the period ending 30 June 2021.

The Australian Prudential Regulation Authority (APRA) has given L.U.C.R.F Pty Ltd ABN 18 005 502 090 as trustee for Labour Union Co-operative Retirement Fund a notification of a determination under subsection 60C(2) of the Superannuation Industry (Supervision) Act 1993 that the requirement in subsection 60D(1) of the Act relating to performance has not been met for the MySuper product offered by L.U.C.R.F Pty Ltd, in relation to the financial year ending 30 June 2021.

APRA had not given L.U.C.R.F Pty Ltd a notification of another determination under subsection 60C(2) of the Superannuation Industry (Supervision) Act 1993 that that requirement had not been met for the MySuper product offered by L.U.C.R.F Pty Ltd, in relation to the previous financial year.

Frequently asked questions

Why did I get an email/letter about underperformance?

This letter had to be sent to all fund members invested in the MySuper Balanced option, which performed below the benchmark set by the legislation.

If you are invested in one or more of LUCRF Super’s other 10 investment options and not the MySuper Balanced option, you should not have received this letter.
 

What is the performance test?

The Your Future, Your Super (YFYS) performance test is a new test recently introduced by the Federal government and conducted by APRA, the prudential regulator for super fund products.

It’s the first time this has been done, and it compares fund performance over seven-years to 30 June 2021, against a benchmark determined for the Fund’s MySuper product. It takes into account administration fees for last financial year.

The test doesn’t apply to any of the Choice investment options, that is other investment options apart from the MySuper Balanced option – only a MySuper investment option. Only 76 investment options from 1,674 APRA-regulated funds were assessed. Meaning the test measures a specific investment option, not the entire fund. Each fund has several investment options available.

You can view the investment returns for all of our non-MySuper investment options.

What is our MySuper product?

Our default investment option is the MySuper Balanced investment option. This is the option you’re automatically invested in if you don’t choose an investment option.

Why are some MySuper products labelled ‘underperforming’?

From 1 July 2021, the annual performance test applies to all MySuper products. Products with net investment returns more than half a percent lower than their benchmark, are listed as ‘underperforming’.

The first performance test is for the seven-year period ending 30 June 2021. Future performance tests will apply to eight-year periods.

How are MySuper products' performance assessed?

The annual performance test considers two key parts of the product:
 
  • Performance: net investment returns for the last seven financial years, which are annualised investment returns less investment fees and taxes, versus a benchmark determined for the Fund’s MySuper product, and
  • Fees: administration fees which are calculated based on what was charged last financial year.

Performance
The investment returns benchmark is based on a product’s strategic asset allocation, i.e. the percentage of the product the fund allocated to different asset classes, like shares, property, infrastructure, etc. This means that each MySuper product is measured against a different benchmark.

This test measures against the strategic asset allocation and not the actual asset allocation.

The strategic asset allocation is what asset classes the product aims to invest in and in what amounts, however it may not be the actual asset allocation, which is what is currently invested in as it takes time to buy and sell in some asset classes. For example, many funds invest in infrastructure (i.e. airports, hospitals, rail), however, they often need to wait for these assets to be available to invest in, which means achieving the strategic asset allocation can be delayed.

Because the performance is assessed based on strategic asset allocation, there are funds with lower 7-year net returns that passed the test, and funds with higher 7-year net returns that failed the test. So a MySuper product that has a more conservative strategic asset allocation could do better under the test than a more growth oriented MySuper product that achieved a higher rate of return.

Fees
For the test, only FY21 administration fees have been applied across all 7 years of test – so funds that reduced fees in FY21 have benefited, when in fact they had higher fees in previous years. This is consistent with the Government’s intent to motivate funds to continue to reduce their fees.

The ATO Fund Comparison tool, measures past performance and doesn’t consider products that have changed their investment processes, structures, or fees and the time to implement these changes. This means that positive changes made over the 7 years may not be reflected in the test because of the time it took to implement them and then see the expected benefits.

It’s important to review and understand the results of the test so you can make an informed decision when considering switching products.

What are we doing about our performance now?

After the GFC in 2008, we changed our investment strategy to be more conservative to protect our members’ savings. We continually review our investment strategy, and in 2016, we changed our strategy to increase our exposure to growth assets.

The reason we didn’t pass the performance test was primarily because of this change - as it took several years to fully implement the changes from 2016. The performance test measured our portfolio holding more growth assets than we actually held.

Unfortunately, this feature of the performance test has had a negative impact on the assessment of the MySuper Balanced option’s performance.

With the change in our investment strategy to take advantage of asset classes such as unlisted infrastructure, we are pleased they are now delivering better returns.

We continue to review and adjust our investment mix, and our FY211 result is evidence that our change in investment strategy is producing positive results.

What has been the performance of our MySuper Balanced option?

Our MySuper Balanced option was assessed as non-performing in 2021 based on the Government’s assessment methods.
 
It’s also important to look at the performance of our MySuper Balanced option over a range of periods of time, and consider the returns delivered over these time periods.

For example, our latest financial year performance is pleasing and our MySuper Balanced option was one of the top 20 performers over the last financial year.
 
LUCRF Super is proud of the returns we achieved for members through the COVID-19 pandemic to date but it is unwise to focus only on the last financial year. 

The % p.a. return as of 30/06/21 for MySuper Balanced (and its predecessor, the Balanced option)1,2,3

1 year 3 year 5 year 7 year 10 year Since inception3
18.66% 7.64% 8.44% 7.49% 7.96% 9.65%

Why did the MySuper Balanced option underperform?

We have always focused on delivering better outcomes for our members by balancing the investment rewards and their potential risks.

After the GFC in 2008, we changed our investment strategy to be more conservative to protect our members’ savings. We continually review our investment strategy, and in 2016, we changed our strategy to increase our exposure to growth assets.

The reason we didn’t pass the performance test was primarily because of this change - as it took several years to fully implement the changes from 2016. The performance test measured our portfolio holding more growth assets than we actually held.

Unfortunately, this feature of the performance test has had a negative impact on the assessment of the MySuper Balanced option’s performance.

Now, we are seeing the change in our investment strategy paying off – our FY21 return is placed in the SuperRatings top 20 at 18.66%1.

Why was this underperformance not pointed out to me before?

This is a new investment performance test developed by the Federal Government (Your Future Your Super legislation) and conducted by the Australian Prudential Regulation Authority (APRA) and compares performance over seven years for MySuper products.

It’s important to look at the performance of our MySuper Balanced option over a range of periods of time, and consider the returns delivered over these time periods:

The % p.a. return as of 30/06/21 for MySuper Balanced (and its predecessor, the Balanced option)1,2,3

1 year 3 year 5 year 7 year 10 year Since inception3
18.66% 7.64% 8.44% 7.49% 7.96% 9.65%


We have also had consistently low fees over many years which has contributed to members getting the most out of their super.

TOTAL FEES FOR AN ACCUMULATION BALANCED OPTION PER YEAR  
(BASED ON A $50,000 ACCOUNT BALANCE)
LUCRF SUPER BALANCED OPTION AVERAGE INDUSTRY SUPER FUND BALANCED OPTION AVERAGE RETAIL SUPER FUND BALANCED OPTION
$497 p.a. 
$505 p.a
$803 p.a.
See all fees and costs.

How do I find out my specific return?

You will have recently received your annual statement that includes your balance, your returns and any fees and costs that have been paid in the last financial year.

You can also login to Members Online and see this information at any time.
 

How does our performance compare to other funds?

Fund performance can vary from one year to the next, and depending on the period you look at, returns can be high or low relative to other funds.

The ATO YourSuper comparison tool is available to help you compare funds.
 

What other products do we have and how can you switch?

You can get the most out of your super by making sure it’s invested in an investment option that suits your age and investment timeframe.

Take action:

How have our other investment options performed?

Super is a long-term investment and we’re proud that our average performance over the last five, ten and 40 years shows solid long-term success.

We have 11 different investment options for you to consider. Each has different levels of risk. You can see the performance of each of our investment options.

Talk to an advisor – call your advisor or make a booking.
 

What does it mean for you?

The performance test was designed to inform you about fund performance, and to help you decide if you want to stay in MySuper Balanced or choose another product, which may be another fund or one of the other LUCRF Super investment options.

We have 11 different investment options for you to consider. Each has different levels of risk.

You can see the performance of each of our investment options.

Talk to an advisor – call your advisor or make a booking.
 

Why should I stay with LUCRF Super?

With over 40 years’ experience, we understand your industry, background, and financial needs, and:
 
  • Invest your money responsibly to get rewards at an acceptable level of risk
  • Offer low fees and charges
  • We offer insurance which is designed to meet the needs of our members
  • Provide access to personalised customer service support at work and remotely, and offer advice at no additional cost on your investments and other aspects of your LUCRF super account.

We also plan to merge with AustralianSuper in 2022 - subject to due diligence. LUCRF Super, the nation’s first industry super fund, chose AustralianSuper as the Fund to continue LUCRF Super’s proud and long-standing record of acting in members’ best financial interests.


About AustralianSuper
AustralianSuper manages more than $225 billion of members’ retirement savings on behalf of more than 2.4 million members from around 350,000 businesses. One in 10 working Australians is a member of AustralianSuper, the nation’s largest pension fund. The Fund is a top performing fund delivering annual member returns of 9.49% a year over the past 10 years ranking it number 1 in Australia.1

See more details here.

What should I think about before taking any action?

If you are thinking of making a change to your account:
 
  1. Consider switching options to a Choice option within the fund. To find out what type of investor you are and which options could be right for you, answer five simple questions.
  2. Use the ATO YourSuper comparison tool to help you compare funds.
  3. Make sure your insurance cover is appropriate for your needs as it may stop if you close your account.
  4. Understand the exposure to growth assets (risk) that other products have and ensure you are comfortable with the risk/return tradeoff.
  5. Make a booking with one of our super specialists to discuss questions you may have in relation to the performance test or your account.

Are performance and fees the only differences between super funds?

While recent performance and current fees are important factors to consider when evaluating a super fund, there are several other things to think about, such as:

Investment risk – Individuals will have a different appetite for investment risk (the chance of losing some of your super savings because of investment losses).

Investment approach – While some individuals may be comfortable to invest in any business that produces a ‘good’ return, others may decide that certain investment opportunities should be avoided because the underlying business contributes to  harmful behaviours (e.g. weapons manufacturing, tobacco, abortion services, etc).

Insurance coverage – Each super product has a different insurance product attached, with different levels of standard coverage, costs, and policy terms.

Services offered – While some individuals may be fine with the most basic of services being provided by their super fund, others will be interested in having an internal call centre, a mobile app or some advice services to help them pick the right investment option or insurance within the super fund. Funds that offer these services may charge higher fees than funds that outsource their call centre or offer limited online functionality.

A high-performing fund may take more investment risk than an individual may be comfortable with or be invested in companies involved in practices that an individual does not support. Similarly, an otherwise low-cost fund may only offer costly insurance which doesn’t provide a high level of coverage, or that a fund does not offer services that an individual expects to use.
 

1Past investment performance is not a reliable indicator of future investment performance.

2See investment performance across all time periods and investment options here.

3Returns are for the MySuper Balanced option since inception on 1 July 2013 and for the Balanced option prior to that which was the default option and had substantially the same asset allocation since 19 December 1978.

All figures are correct as at date of publishing (23 September 2021) and are subject to change.

Any advice on this website does not take into account your objectives, financial situation or needs. Consider whether it is appropriate to you and read the relevant PDS before making an investment decision. Issued by L.U.C.R.F Pty Ltd ABN 18 005 502 090 AFSL 258481 as trustee for the Labour Union Co-Operative Retirement Fund (LUCRF Super) ABN 26 382 680 883.

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