Member outcomes assessment

We’ve assessed each stage of our MySuper Glidepath investment option separately. We have taken this approach so that each stage of the Glidepath can be more easily compared to other MySuper products. The outcomes and metrics on which we based this assessment are largely prescribed by the Australian Prudential Regulation Authority (APRA).

Our lifecycle MySuper product was launched on 1 October 2015, and the performance of these stages over the past three and five years net of tax, after investment fees, and after administration fees (assuming a $50k balance) is shown in the charts below. Our MySuper members received competitive, and in some cases first quartile, investment returns compared to other MySuper products over these periods.

Past performance is not a guarantee of future performance.

Past performance is not a guarantee of future performance.

The Government’s annual performance test came into effect for MySuper products on 30 June 2021 covering performance relating to the seven year period up to 30 June 2021. To derive a seven year MySuper performance history, the investment returns of our Growth investment option and Glidepath were combined. Our MySuper product passed this test.

Qantas Super has a safety-first approach to investing, which has generally delivered smoother returns to members. This can be assessed by reference to the standard deviation of returns, where a lower standard deviation means less volatility of returns. We observed that Glidepath has had a similar, or in some cases lower, standard deviation of returns compared to the median standard deviation of other MySuper products.

Past performance is not a guarantee of future performance. SuperRatings, the independent research house that provides this data, did not have sufficient information to publish results for the Cruising stage.

The level of investment risk was also assessed by estimating for each Glidepath stage the probability of experiencing a negative return over the next 20 years. Consistent with the standard deviation assessment, it was observed that the level of investment risk for Glidepath is comparable to other MySuper products within the industry.

Sharpe ratios are used to understand the return of an investment in relation to its risk, or in other words, an investment option’s risk-adjusted return. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return. All stages of Glidepath had Sharpe ratios that exceeded the industry median.

Past performance is not a guarantee of future performance. SuperRatings, the independent research house that provides this data, did not have sufficient information to publish results for the Cruising stage.

Each investment option under our choice product was considered separately to make it easier to compare to similar products in the industry.

The chart below shows the net of tax and after investment fees returns that are applied to super accounts for each investment option’s relevant time horizon. The relative performance for income accounts is similar to these returns for super accounts.

Past performance is not a guarantee of future performance.

The performance for each investment option is competitive with other superannuation funds over each option’s relevant time horizon. In addition, the one year returns for our choice investment options were also excellent with each investment option ranked in the first quartile relative to peers.

The level of investment risk of the choice product has been assessed in reference to the standard deviation of returns, where a lower standard deviation means less volatility of returns. We also estimate for each investment option the probability of experiencing a negative return over a 20 year timeframe.

Overall, the level of investment risk for the choice product is comparable to other peer funds within the industry. While the Conservative option’s standard deviation outcome is modestly higher than the industry median, it is in line with peer funds when considering the expected number of negative returns over a 20 year timeframe.

Past performance is not a guarantee of future performance.

Sharpe ratios are used to understand the return of an investment in relation to its risk, or in other words, an investment option’s risk-adjusted return. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return. All investment options had Sharpe ratios that were competitive with the industry median. The Cash option’s good performance and low standard deviation resulted in a Sharpe ratio that materially exceeded the industry median.

For the assessment of the default insurance we offer members as at 30 June 2021 in our MySuper and choice (super) products we have:

• Considered whether the premiums paid inappropriately erode retirement benefits
• Compared the premiums payable to comparable products in the industry
• Reviewed the claims ratio, which provides an indication of whether the premiums are too high relative to the actual claims experience

The results for these assessments are mixed. Qantas Super has been challenged by insurance affordability when compared with other super funds. We have provided relatively generous default levels of death and total and permanent disablement (TPD) cover, which had previously been less expensive, and default income protection (IP) cover has been valued by our membership; especially by those in occupations which would not be able to obtain cover at reasonable rates (or at all) elsewhere in the market.

The direct impact of the COVID-19 pandemic on Qantas Group and the standing down of the majority of its workforce resulted in significant increases to TPD and IP insurance premiums from 1 August 2020. This has been compounded by a deterioration in the TPD claims experience from 2020 through to early 2021, which will in turn lead to a further increase in TPD insurance premiums with effect from 1 July 2022.

As a result of the above, the Trustee has undertaken a comprehensive insurance benefit design review during 2021 and 2022, with a focus on reducing the insurance premiums paid by members and the resulting erosion of super benefits. This will be achieved by reducing the current generous levels of default death and TPD cover provided to members, which will in turn reduce the cost of default insurance cover to approximately 1.5% of salary on average. These changes are expected to take effect on 1 July 2022.

Overall, 71% of members have annual death, TPD and IP insurance premiums at or below 1.5% of their salary, which is slightly below the target we set.

Across our Plan as a whole, we observed that:

• 81% of our members have death insurance premiums at or below the median premium payable for other funds that provide death insurance
• 15% of our members have TPD insurance premiums at or below the median premium payable for other funds that provide total and permanent disablement insurance
• 45% of our members have IP premiums at or below the median premium payable for other funds that provide income protection insurance

We consider the insurance premiums to be competitive relative to the market when taking into account the characteristics of our members. In particular, while the premiums for TPD and IP are above the median super fund premium for the majority of our members, many of these members would find it difficult to obtain this cover at similar rates to that offered by Qantas Super, if at all, due to the high risk nature of their occupations from an insurance perspective.

The claims ratio is the percentage of insurance premiums paid out in insurance claims. For example, an 80% claims ratio means that for every $1 of premium members have paid for insurance cover, we’ve paid 80 cents back to members in claims. In relation to our Glidepath and choice members, we observed that the three year average claims ratio for has been:

• Death cover was 70%, which is slightly below the expected range of 75% to 90%
• TPD cover was 104%, which is above the expected range of 75% to 90%
• IP cover was 80%, which is at the top of the expected range of 65% to 80%

The actual claims experience described above is a key input into the insurance premium changes effective 1 July 2022. Overall, these results indicate that the premiums are set at a reasonable level based on the actual claims experience.

The assessment of fees and costs considers the allocation of costs across the membership and compares the investment fees and non-investment fees to comparable products in the industry.

Based on the results of the assessment, we concluded that there is a fair and reasonable allocation of costs between products, divisions within the Plan, and the different types of members. As a not-for-profit fund, our fees are set at a level to recover these costs.

When considering fees and costs it is important to bear in mind that the benefits, services and facilities offered by funds are different. We are modestly more expensive than some other funds in the market because our offering is tailored to the needs and circumstances of our members; being current and former employees of Qantas Group.

We’ve assessed each stage of our Glidepath investment option separately. We have taken this approach so that each stage can be more easily compared to other MySuper products. The outcomes and metrics on which we based this assessment are largely prescribed by APRA and we are required to use APRA data.

Fees (i.e. which includes investment management fees, investment performance fees and administration fees), for Glidepath are shown below as a percentage of balance for a member with a $50,000 balance (as required by APRA). In general, the Plan targets being good value for money for members. At 30 June 2021 the Plan’s total fees for Glidepath were greater than the median fees of comparable products in the industry. The members of the Plan enjoyed excellent investment performance for the year ending 30 June 2021, which in turn led to an increase in performance fee payments to our external investment managers, and this was a significant contributor to this fee outcome.

In addition, the Plan’s investment fees reflect our well diversified investment strategy, which includes allocations to various alternative sub-asset classes. While the investments within these alternative sub-asset classes have enhanced the return and risk profile of our investment options, they are also more expensive than traditional asset classes.

It is also noted that these results do not reflect the administration fee reductions made with effect 1 July 2021, and so an improvement on this result is expected to have now occurred.

We used survey data from SuperRatings as the basis for our assessment of our choice product. At a total fee level (i.e. where total fees includes investment management fees, investment performance fees and administration fees), the investment options under our choice product generally have modestly higher fees than comparable products, with the exception being the Cash option.

As described above, the members of the Plan enjoyed excellent investment performance for the year ending 30 June 2021, which in turn led to an increase in performance fee payments to our external investment managers. In addition, the Plan’s investment fees reflect our well diversified investment strategy, which includes allocations to various alternative sub-asset classes, which are generally more expensive than traditional asset classes.

Again, these results do not reflect the administration fee changes made with effect 1 July 2021 and so an improvement on this result is expected to have now occurred.

Fees for choice options are shown below in dollar terms for a member with a (a balance bracket as provided by SuperRatings that is closest to the average balance of members in our choice product).