Australia's pension regulator warned that hundreds of thousands of savers are in underperforming funds as the sector faces "serious" and widespread sustainability pressures.
The Australian Prudential Regulation Authority released its latest so-called heat map of the A$3.3 trillion ($2.3 trillion) pensions industry on Thursday. The annual assessment found that around 800,000 members' retirement savings were in products that were considered inferior.
"APRA expects that trustees with under-performing products will consider options to transfer members or otherwise restructure their businesses, particularly where sustainability pressures are significant," APRA Deputy Chair Margaret Cole said in a statement.
APRA said the heat map had helped to eradicate unacceptable product performance since 2019, but challenges remained. It said most pensions, known as superannuation funds, had posted negative growth over the past three years across one or more of the report's sustainability metrics.
The report assesses default pension products by looking at investment returns, fees and costs, as well as the long-term ability of funds to make money for members.
The industry has faced heightened scrutiny, with the introduction of an annual performance test which scores funds as a "pass or fail." The last report card, released in August, failed four products for a second time. Thursday's heat map named six funds as having a "significantly poor" performance, returning -0.50% per annum or worse.
The Association of Superannuation Funds of Australia responded to Thursday's report by criticizing APRA's methodology, saying that the country's pensions were "unquestionably financially strong."
"APRA's use of net cash flows as a measure of sustainability is misguided," ASFA Chief Executive Officer Martin Fahy said in a statement. "The purpose of the superannuation system is to pay out pensions in retirement, not hold on to the money in perpetuity."