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), and we use comparison data sourced from APRA and SuperRatings.

Our lifecycle MySuper Glidepath product was launched on 1 October 2015, and the performance of each investment stage over the past three and five years, after investment management fees, after investment performance fees, after administration fees, and net of tax (assuming a $50k balance) are shown in the charts below. Our MySuper Glidepath members received great investment returns compared to other MySuper products over these periods, with Take-off and Altitude being in the first quartile for both periods.

Past performance is not a guarantee of future performance.

Past performance is not a guarantee of future performance.

As at 30 June 2023, the Government’s annual performance test was extended beyond MySuper products to also include choice products and was measured over a nine year period. Our MySuper Glidepath and choice products passed this test.

Investment risk 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 similar standard deviations of returns compared to the median standard deviations of other comparable superannuation products.

Past performance is not a guarantee of future performance.

The level of investment risk was also assessed by estimating for each Glidepath investment 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 MySuper Glidepath is comparable to other superannuation products within the industry.

Sharpe ratios are used to measure 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 stages of MySuper Glidepath had Sharpe ratios that ranked in the first quartile relative to peers.

Past performance is not a guarantee of future performance.

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 performance of each investment option over its relevant time horizon, after investment management fees, after investment performance fees, gross of administration fees, and net of tax relative to the median return of industry peers. The relative performance for income accounts is similar to these returns for super accounts.

Past performance is not a guarantee of future performance.

Qantas Super’s choice product members also received great investment returns compared to industry peers over each option’s relevant time horizon.

Thrifty is the Plan’s new low-cost investment option and was launched on 1 July 2021. While Thrifty has a minimum suggested investment time horizon of seven years, it only has two years of performance history to 30 June 2023. It is important to bear this in mind when considering the Thrifty option. Members invested in the Thrifty option receive largely market based returns in the sectors in which the option invests.

The level of investment risk for the choice products has been assessed by 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 each established choice product investment option is lower when compared to other industry peers. While Thrifty’s two year standard deviation is higher than the industry median, a two year period is short time frame to be measuring standard deviation and it is broadly in line with the standard deviation of other more passive industry peer options.

Past performance is not a guarantee of future performance.

Sharpe ratios are used to measure 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 established choice investment options had Sharpe ratios that ranked in the first quartile relative to peers with the exception of the Aggressive option which ranked in the second quartile. 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 2023 we have:

• Considered whether the premiums paid inappropriately erode retirement benefits
• 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 objectives are mixed. The cost of Qantas Super providing insurance reflects the significant proportion of the membership that have high risk occupations. In addition, the global COVID-19 pandemic and the resulting standing down of most of our active membership, led to a significant increase in premium rates for Total and Permanent Disablement (TPD) and Income Protection (IP) cover from 1 August 2020. However, these outcomes should be balanced by the difficulty our high risk members would have in obtaining TPD and IP cover outside the Plan at reasonable rates, or at all.

In FY2021/22, the Trustee undertook an extensive review of Qantas Super’s default insurance arrangements with a focus on reducing the erosion of members’ superannuation benefits through insurance premiums. This was achieved by reducing levels of default Death and TPD cover provided to members, which in turn reduced the average aggregate cost of default cover for Death, TPD, and IP to approximately 1.5% of salary. These changes took effect on 1 July 2022 and have shown some improvement in the insurance outcomes metrics.

A review of premium rates effective 1 July 2022, with overall rates for TPD cover increasing and death and IP cover reducing, has resulted in the TPD claims ratio significantly reducing for FY2022/23 (with smaller increases in the other ratios).

Material reductions to TPD and IP premiums following the removal of all remaining COVID-19 loadings took place on 1 July 2023 and 1 January 2024 which will further improve the insurance premium outcomes for FY2023/24.

As at 30 June 2023, 83% of members have annual death, TPD and IP insurance premiums at or below 1.5% of their salary, which is within the target we set.

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, the Plan has paid 80 cents back to members in claims. In relation to our MySuper Glidepath and choice members, we observed the following three year average claims ratios (over the period to 30 June 2023):

• Death cover was 111%, which is above the expected range of 75% to 90%. This is due to higher than average claim sizes in FY2020/21 and FY2021/22.
• TPD cover was 58%, which is below the expected range of 75% to 90%. This is due to lower claim volumes than expected.
• IP cover was 56%, which is below the expected range of 65% to 80%. This is due to lower claim volumes than expected, largely as a result of the suspension of IP cover for employees while they were stood down.

The actual claims experience described above is a key input into the insurance premium changes effective 1 July 2023 and 1 January 2024. In general terms, if claims ratios are above the expected range then a premium rate increase is expected and the reverse is true where claims ratios are below the expected range, although other factors are considered as well such as volatility in claims experience.

The assessment of fees and costs considers the allocation of costs across the membership and compares our investment management fees, investment performance fees and administration 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 Qantas Super, and the different types of members. As a not-for-profit fund, our fees are set at a level to recover these costs.

We’ve assessed each stage of our MySuper 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 comparison data.

Fees (i.e. which includes investment management fees, investment performance fees and administration fees), for MySuper Glidepath are shown below as a percentage of balance for a member with a $50,000 balance (as required by APRA). In general, Qantas Super targets being good value for money for members.

Qantas Super’s MySuper Glidepath total fees as of 30 June 2023 were significantly lower than the median fees of comparable products in the industry. This follows the FY2021/22 Member outcomes assessment in which our MySuper Glidepath total fees were significantly higher than the MySuper median fees . The FY2021/22 MySuper Glidepath total fees outcome was a direct result of the excellent investment performance achieved during that financial year, which in turn led to an increase in investment performance fees attributed to our external investment managers. FY2022/23 saw the reversal of a significant amount of these investment performance fees accrued in FY2021/22, which resulted in our MySuper Glidepath total fees being well below the total fees of other MySuper products as of 30 June 2023. It is important to note that the great investment returns shown previously in this FY2022/23 Member outcomes assessment are after investment management fees, investment performance fees and administration fees have been deducted, and are also net of tax.

In addition, Qantas Super’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 are more expensive than traditional asset classes, they are expected to materially enhance the returns of our investment options over the long term, despite the short term variations that we have seen over the last two financial years.

We have assessed each choice investment option separately. We have taken this approach so that each investment option can be more easily compared to industry peers. We used survey data from SuperRatings as the basis for our assessment of our choice products.

Fees (i.e. which includes investment management fees, investment performance fees and administration fees), for our choice product are shown below in dollar terms for a member with a $375,000 balance (a balance that is closes to the average balance of members in our choice products).

Qantas Super’s total fees for the established choice investment options as of 30 June 2023 were significantly lower than the median fees of comparable products in the industry. This follows the FY2021/22 Member outcomes assessment in which our choice product total fees were significantly higher than those of industry peers. The FY2021/22 choice product total fees outcome was a direct result of the excellent investment performance achieved during that financial year, which in turn led to an increase in investment performance fees attributed to our external investment managers. FY2022/23 saw the reversal of a significant amount of these investment performance fees accrued in FY2021/22, which resulted in our total fees for the choice investment options being well below the total fees of the median fees of comparable products in the industry as of 30 June 2023. It is important to note that the great investment returns shown previously in this FY2022/23 Member outcomes assessment are after investment management fees and investment performance fees have been deducted, and are also net of tax.

In addition, Qantas Super’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 are more expensive than traditional asset classes, they are expected to materially enhance the returns of our investment options over the long term, despite the short term variations that we have seen over the last two financial years.

Total fees for our low-cost investment option Thrifty are significantly lower when compared to industry peers but in line with the total fees of other more passive industry peer options.