After years of warning Australian retirement plans to fix their performance, the nation's prudential regulator has told a second firm to merge with a bigger and better-performing rival.
Christian Super, Sydney, the A$2 billion ($1.4 billion) fund that invests in line with Christian values, has until July 31 to implement a plan to combine with a larger fund due in part to its persistent underperformance, the Australian Prudential Regulation Authority said in a statement Tuesday. The fund's operating license has been restricted and it must use an independent expert to ensure the merger talks are in the best financial interests of its members, the statement said.
"Christian Super has a legal obligation to protect the best financial interests of its members," APRA member Margaret Cole said. "In light of its ongoing underperformance, APRA's assessment is that the optimum way for Christian Super to do this is to move its members to a better performing and more sustainable product as soon as possible."
It's the second plan in as many months that APRA has targeted after finding Christian Super and nine other default retirement savings plans were among the nation's worst performers for a second year. The regulator last month told Energy Industries Superannuation Scheme, Sydney, it must merge by end-June due to its persistent underperformance and governance issues.
The country's A$3.4 trillion pension industry is under pressure to lift its performance after a series of reviews found the system was beset by poorly-performing funds and high fees. The regulator in 2019 published its first so-called heat map assessment of default investment plans, warning funds it would take action if performance wasn't improved.
Christian Super's default plan returned an annualized 7.6% in the seven years to Oct. 31, according to its website. The median Australian retirement plan returned an annualized 8% over the same time period, according to research, data and analytics firm Chant West.
