Are you in an “unsustainable” super fund? Here’s how to tell

In the regulator’s annual report for 2025-26, it revealed that the number of super fund members exposed to unsustainable funds had increased from 763,700 in 2024-25 to 1,031,300.

“This reflected a small increase in the number of trustees facing multiple strategic challenges, including operational efficiency, growth and competitive positioning,” APRA said.

“While the measure increased during the reporting period, it remains well below historical averages. APRA will continue to hold trustees to account for delivering better long-term outcomes for members.”

In fairness to APRA and the superannuation sector, this is a considerable improvement compared with where this sat just five years ago, with around 3 million fewer Australians in these funds.

The report doesn’t go into much detail about what exactly makes a super fund “unsustainable”, however based on previous APRA reports it largely includes funds with a lack of scale that struggle to spread the operating costs across their member base, negative cash flows, shrinking or stagnant member numbers, high fees, and persistent underperformance.

Robert Rich, director and financial adviser at Unite Wealth, says investors should understand this as a “forward-looking warning”.

“I think super is a scale game. When a fund loses scale, the costs of running it (technology, cyber security, investment teams, retirement support etc) fall on fewer members, and that eventually shows up in higher fees, or lower service/returns.”

Are you in the million?

Unfortunately for super members that want to know if their fund is among this group, APRA did not name those funds. So, what can you do to figure out if you are among that million Australians? Rich says the best option is to look for the same signs that APRA does.

“You could also check the ATO’s YourSuper comparison tool to see how your fund compares on fees and returns,” he says.

“Look at your fund’s annual report or its yearly Member Outcomes Assessment, which every fund has to publish, and see whether membership and assets are growing or going backwards. Keep an eye out for notices suggesting the fund is ‘exploring a merger’ or ‘looking for a partner’, that’s usually a sign it’s on APRA's radar.”

Red flags to watch:

• A shrinking membership year on year
• Total fees noticeably above similar funds, especially flat dollar fees
• A failed performance test letter
• Slow or clunky service: rollovers that take weeks, phone queues, an outdated app
• Merger talk or a change of name or trustee
• Insurance cover being cut or premiums jumping

“One flag on its own isn’t a reason to panic, but two or three can be a reason to reconsider,” says Rich.

So, you’re in an underperforming fund…

If you have gone through some of the above steps and identified a few red flags with your super fund, or you have simply been underwhelmed by recent performance, the next step is doing something about it. But where do you start?

“Compare your alternatives with a licensed financial adviser or online. It's important not to just look at returns over recent years to aim for a top performer. We know of course that past performance isn't a great indicator of future performance,” Rich says.

There is also a lot more to consider than just the pure performance numbers. Think about the toll of sticking with a fund that has decent returns and reasonable fees but is underwhelming on every other aspect.

“Over a client's life, returns and fees do the heavy lifting, because small differences compound into big numbers,” Rich says.

“But service matters more than people think, and it matters most at the moments that count. When you’re rolling money over, retiring, setting up a pension, or when a family is claiming a death benefit after losing someone.”

As he points out, regulators have taken action against a number of funds in recent years over slow claims handling - including some of the largest funds in the country - and those delays happen at the worst possible times.

“I’d also say efficiency is often an early warning sign. A fund that can’t answer the phone or process a rollover on time is frequently one that’s under strain behind the scenes. So I’d rank it performance and fees first, insurance second, service a close third, but I wouldn’t ignore a fund that’s consistently hard to deal with.”

Another important factor if you are considering switching is to check what insurance you would lose.

“That can’t always be replaced, particularly if your health has changed. If you’re in a defined benefit or an employer plan with special terms, definitely seek advice first, as you could really shoot yourself in the foot.

“For most people the answer is a simple switch to a large, low cost, well performing fund.”