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MySuper Heatmap Frequently Asked Questions

These frequently asked questions provide guidance on how to understand the APRA MySuper Product Heatmap, including any additional updates to the Heatmap. The page also includes answers to technical questions regarding the Heatmap.

MySuper Product Heatmap - December 2020

Methodology

Since the release of the 2019 Heatmap, APRA has considered the feedback from external stakeholders and undertaken consultations with industry experts on the Heatmap methodology.

1. Have there been any changes made in the metrics or methodology in the 2020 MySuper Product Heatmap? 

APRA has made minimal changes to the methodology supporting the Heatmap metrics or thresholds from the 2019 Heatmap. Changes in methodology for the 2020 Heatmap include:

  • Time horizon. APRA has extended the time horizon for its analysis of investment performance to include six years, in addition to three and five year time horizons, where data is available.
  • Growth asset assumption for property and infrastructure assets, ‘not applicable’ listing type. Property and Infrastructure with a ‘Not applicable’ listing type are assumed to be 50% Listed and 50% Unlisted (previously 100% Listed). This means that the strategic growth asset allocation for these types of assets is 87.5%.
  • International property and international infrastructure indices. For these asset classes, APRA has updated its methodology to use global indices that are adjusted to reflect the withholding taxes applicable for an Australian institutional investor, to remove any potential understatement of index performance arising from the presence of double taxation treaties.

2. What future changes is APRA considering for the MySuper Product Heatmap methodology? 

  1.  Asset class indices used in benchmark portfolios. The feedback largely recommended enhancements to APRA’s methodology that are dependent on changes to APRA’s reporting collection. For example, more detailed investment benchmarking using a wider range of asset class indices requires increased granularity in the asset classes reported to APRA. This is being addressed through the Superannuation Data Transformation (“SDT”) program and APRA will review the Heatmap to reflect this additional information once the new reporting standards take effect in late 2021. 
  2. ‘Stitching of investment performance’. To maintain the long-term investment performance history of MySuper products, APRA intends to map (or ‘stitch’) the performance of products that have undertaken a variety of changes, including (but not limited to):
  • change from a single investment strategy to a lifecycle strategy (or vice versa);
  • expansion or consolidation of lifecycle stages in a lifecycle strategy; 
  • fund mergers; and  
  • trustee / fund restructures and product consolidations.

For example, where a product changes its investment strategy from a single strategy to a lifecycle strategy, the performance of all lifecycle stages would include the performance history of the single strategy up to the date the strategy change took effect and the performance of the lifecycle stages thereafter. 

 

New web-based, interactive Heatmap tool

APRA has published the MySuper Product Heatmap via an online, interactive, web-based tool, in addition to the Excel publication and CSV data file. The online, web-based version of the Heatmap aims to provide users with a more user-friendly experience when using the Heatmap.

3. Why has APRA released an online version of the Heatmap, as part of the December 2020 release? 

There are functionality improvements compared to the Excel file, such as:

  • the ability for the user to sort by trustee, RSE or MySuper product while maintaining grouping of lifecycle products with the lifecycle stages;
  • filtering for single-strategy or lifecycle products (or all);
  • selecting the ‘concise’ or ‘expanded’ suite of Heatmap metrics; and
  • displaying only the ‘investment performance’, ‘fees and costs’, or ‘sustainability of member outcomes’ Heatmap metrics.

4.  Where can users provide feedback on the online version of the MySuper Product Heatmap? 

Users can provide feedback on any aspect of the MySuper Product Heatmap package by emailing MemberOutcomes@apra.gov.au.

 

Regulatory Guide 97: Disclosing fees and costs in PDSs and periodic statements

ASIC released its update to Regulatory Guide 97: Disclosing fees and costs in PDSs and periodic statements on September 2020 which included transitional arrangements for RSE licensees. From 30 September 2020, trustees may elect to comply with the updated PDS requirements, and by 30 September 2022 all trustees are required to comply with these requirements.

5. How has APRA disclosed products which have adopted the RG 97 requirements, effective September 2020? 

Where a MySuper product has adopted the final requirements in RG 97 in their product disclosure statement (PDS), the product is asterisked in the Heatmap.

6. What is the impact on those products that have adopted RG 97 compared to the products that have not adopted the new requirements? 

In the 2020 Heatmap, three products have disclosed their fees and costs under new RG 97 fee disclosure requirements. For these products:

  • the Heatmap’s ‘administration fees’ metrics uses ‘administration fees and costs’ disclosed in their PDS; and
  • the Heatmap’s ‘total fees and costs’ metrics uses the ‘administration fees and costs’, ‘investment fees and costs’, and ‘transaction costs’ disclosed in the product’s PDS.

APRA has analysed the fees and costs of these products and determined that the disclosed fees and costs for these products have not materially increased, and the shade of colour shown in the Heatmap is not materially different. Therefore, the overall conclusions regarding the performance of products on the Heatmap has not materially changed.

APRA will continue to monitor the adoption of the new RG 97 requirements across the industry and take this into consideration when reviewing the methodology, including the colour thresholds. 
 

 

Implication of the Government’s Your Future, Your Super measures on APRA’s MySuper Product Heatmap - December 2020

The Your Future, Your Super package includes a proposed annual performance test for all MySuper and trustee-directed superannuation products. The proposed test consists of a performance metric that assesses net investment returns to a basket of listed indices, tailored to a product’s strategic asset allocation.
 

1. Will the MySuper Product Heatmap change, given the proposed measures announced in the 2020-21 Federal Budget’s Your Future, Your Super package? 

APRA has not made any changes to the MySuper Product Heatmap methodology and metrics related to the proposed annual performance test for December 2020 as the proposed legislation supporting the annual performance test was under consultation at the time of publication. APRA will review the Heatmap and consider any necessary changes when the legislation is finalised.

2. What are the differences between the Government’s proposed annual performance test and the Heatmap approach to assessing investment performance?     

In the Heatmap, investment performance is assessed through a range of metrics, including performance against benchmark portfolios (Simple Reference Portfolio and Listed SAA Benchmark Portfolio) and performance relative to peers. The proposed performance test most closely resembles the ‘Listed SAA Benchmark Portfolio’, although APRA notes that two measures are not the same. The differences between the annual performance test, as described in Your Future, Your Super Reforms to make your super work harder for you (October 2020), and the ‘Listed SAA Benchmark Portfolio’ are:

Differences Proposed annual performance test Heatmap approach
Threshold for investment underperformance Net investment returns below the prescribed benchmark by 0.50% p.a. over an 8-year rolling period. Colour spectrum used from 0% to -0.75% p.a. to show underperformance, with 
-0.75% p.a. being determined as ‘significant underperformance'.
Time horizon for investment performance 8-year rolling period for the proposed performance test (7 years for the first annual test for the 2020/21 financial year). Currently based on 6 years of data, representing the longest time period currently available to APRA, and also 5 years and 3 years.
Index for international property FTSE EPRA Nareit Developed ex Aus Rental Hedged to AUD FTSE EPRA Nareit Developed ex Aus Rental 100% Hedged to AUD Net Tax (Super) Index
Index for Australian and international infrastructure FTSE Developed Core Infrastructure Index hedged to AUD FTSE Developed Core Infrastructure 100% Hedged to AUD Net Tax (Super) Index

 

3. Where can I find MySuper product performance against the proposed annual performance test in the MySuper Product Heatmap? 

The ‘Listed SAA Benchmark, which is the measure that most closely resembles the proposed annual performance test, is currently located in the expanded view of the Heatmap. However there are some differences between the measures as noted in FAQ No. 2 above.

4. Will APRA continue to publish heatmaps, given the Government’s proposal for a performance test as part of the Your Future, Your Super package? 

APRA will continue publishing heatmaps as heatmaps play a core role in APRA’s strategic focus on improving outcomes for superannuation members by improving industry transparency. Heatmaps provide credible, clear and comparable insights into key financial aspects that influence member outcomes, including investment performance, fees and costs, insurance, and sustainability of member outcomes. By holding trustees publicly accountable for their performance, APRA will drive a culture of continuous improvement and improved efficiency across the entire superannuation industry.

APRA will review its heatmaps and consider any necessary changes when the legislation supporting the Your Future, Your Super measures are finalised. 

 

General questions about the MySuper Product Heatmap

1. What does the Heatmap show?

The Heatmap enables like-for-like comparisons of outcomes being delivered by every MySuper product in the key areas of investment performance and fees. It also provides indicators of trends in a trustee's operations relevant to the sustainable delivery of member outcomes.

The Heatmap seeks to foster a culture of continuous improvement across the superannuation industry by providing clear, credible and useful insights into the outcomes that MySuper products are providing to their members. 

2. How should I interpret the Heatmap?

The Heatmap uses colour to make it easy to see how well a MySuper product is delivering appropriate outcomes for its members, relative to its peers and benchmarks.

  • When looking at investment returns, any product that is performing above a determined benchmark is coloured white. Products that are performing below that benchmark are presented on a continuous coloured gradient from pale yellow to dark red.
  • For fees, the colours have been applied slightly differently. Products with lower fees will be coloured white through to amber and those with higher fees coloured amber through to red.
  • For sustainability of member outcomes, products will be coloured either white or amber, with amber indicating that there are some concerning trends that need to be considered to ensure that appropriate member outcomes continue to be provided into the future.

Importantly, APRA is not providing an overall assessment of each product in absolute or relative terms. Each MySuper product is assessed against each metric; a range of measures is necessary to assess performance outcomes. The Heatmap does not currently include measures of the value or performance of insurance offered, or the quality of other features such as member services.

3. Should I use the Heatmap to decide which MySuper product to invest my retirement savings in?

The Heatmap is not intended to be used in isolation when making decisions about where an individual member directs their retirement savings. It is designed to enable like-for-like comparisons of outcomes being delivered by every MySuper product in the key areas of investment performance and fees. It does not provide the complete picture of the outcomes that a MySuper product provides to individual members. For example, the Heatmap does not currently include measures of the value or performance of insurance offered, or the quality of other features such as member services.

4. My MySuper product shows up as all/mostly white. Does that mean it is an excellent MySuper product?

White (or absence of colour) indicates a MySuper product has been performing around or above benchmarks for investment performance and fees and costs. It doesn’t mean there is no room for improvement for the MySuper product. Further, past performance is not a guarantee of future performance.

Additionally, the Heatmap does not provide the complete picture of the outcomes that a MySuper product provides to individual members and should not be used in isolation when making decisions regarding superannuation products.

5. My MySuper product shows up as mostly orange/red. Does that mean I should choose a different MySuper product?

The Heatmap does not provide the complete picture of the outcomes that a MySuper product provides to individual members and other aspects should be considered in determining whether a particular MySuper product is appropriate for an individual member. It is also important to ask the trustee providing the MySuper product about the actions they are taking (or going to take) to address the areas where they are underperforming.

6. Does the Heatmap include all MySuper products?

Yes. The Heatmap includes all MySuper products (both single strategy and lifecycle products) offered by trustees.

Useful information for consumers seeking to better understand superannuation can be found on the Australian Securities and Investments Commission’s MoneySmart website.

7. Does the Heatmap cover member returns?

Yes. The Heatmap provides metrics covering MySuper product returns for three years, five years and six years. These metrics include net returns, net investment returns and net investment returns relative to two benchmark portfolios. MySuper products have only been available for around six years. Performance over longer periods (which is important when assessing superannuation outcomes) will be included as data for these longer periods becomes available.

8. What does APRA mean by sustainability? Why does it matter?

Sustainability of member outcomes refers to the trustee’s ability to continue delivering good financial outcomes to members into the future, and/or address areas that require improvement.

In an industry where retirement outcomes are delivered over decades, trustees must be able to deliver quality outcomes over the long term if they are to truly safeguard their members’ best interests.

9. What is APRA doing about MySuper products that the Heatmap shows as underperforming?

APRA is integrating the Heatmap into its implementation of the revised Supervision Risk and Intensity model. This ensures that the insights provided in the Heatmap inform the determination of the level of supervisory intensity and oversight that appropriately reflects the quality of the outcomes being delivered by each trustee and that trustees with continued areas of underperformance are subject to more intense supervisory action.

For MySuper products that are persistently underperforming, APRA will consider options from its enforcement toolkit to ensure trustees are taking the matter seriously, and that appropriate action is taken to address areas where poor outcomes are being delivered to members.

10. How often will APRA publish the Heatmap?

APRA intends to publish the Heatmap on an annual basis with additional updates to be undertaken as deemed necessary.

11. What is the “as at” date of the Heatmap?

For the ‘investment performance’ and ‘sustainability of member outcomes’ metrics, the Heatmap is based on data up to the period ending 30 June. ‘Fees and costs’ data are effective 1 October (in the 2019 Heatmap, effective date was 15 November 2019) – indirect cost ratios for lifecycle products are sourced from product disclosure statements, and all other fees and costs data are sourced from Reporting Standard SRS 703.0 Fees Disclosed.

12. How can APRA be confident that the data underpinning the Heatmap is correct?

The Heatmap uses data reported to APRA by trustees under the relevant legislation, most of which is subject to audit requirements. APRA has also required trustees to address anomalies it has identified.

13. Which external consultants did APRA use to validate its methodology?

APRA regularly engages with external specialists to assist with specific projects such as the development of the Heatmap and its superannuation data transformation program.

The following consultants were engaged to assist with the initial development of the 2019 Heatmap:

  • David Bell - APRA engaged David Bell in a consulting-style capacity during the development of the MySuper Product Heatmap. In this capacity David reviewed and provided observations and suggestions on APRA’s proposed heatmap metrics relating to investment performance.
     
  • Deloitte - APRA retained Deloitte in the early stages of the MySuper Product Heatmap development through a short term consulting engagement. In this engagement Deloitte reviewed and provided summary observations on APRA’s initial proposed metrics and high level methodology used in two areas - specifically investment performance and fees and costs.
    • No formal opinion or report was provided by Deloitte to APRA. Deloitte provided observations to APRA for the purpose of informing APRA’s further work on the Heatmap. Deloitte was not engaged and did not review the final versions of the MySuper Product Heatmap metrics, methodology or reporting as launched by APRA.
  • Rice Warner – APRA retained Rice Warner in the MySuper Product Heatmap development through a short term consulting engagement. In this engagement Rice Warner reviewed and provided summary observations and feedback on APRA’s proposed metrics and high level methodology. Rice Warner also reviewed draft calculations of the metrics in the Heatmap and provided observations on the application of the methodology and on the interpretation of the data used as inputs to the methodology.
    • No formal opinion or report was provided by Rice Warner to APRA. Rice Warner provided observations and feedback to APRA for the purpose of informing APRA’s further work on the Heatmap.

 

Technical questions about the MySuper Product Heatmap

14. Why did APRA use target strategic asset allocation rather than actual asset allocation in one of the reference portfolio benchmarks?

APRA has considered the merits of both approaches and has determined that using the strategic asset allocation is appropriate for the following reasons:

  • It considers the trustee’s board-approved investment strategy: measuring actual returns against the trustee’s strategic intent (i.e. the strategic asset allocation target) enables measurement of a trustee’s asset allocation decisions (for example whether decisions to overweight or underweight certain asset classes have added value).
  • Actual asset allocation is inherently unstable and is affected by market movements: using actual asset allocation to construct the benchmark portfolios will only measure a product’s performance relative to asset class benchmarks i.e. value added or detracted from asset class implementation only.

This approach was validated and supported by the external consultants engaged by APRA.

15. How has APRA chosen the growth and defensive allocation split for infrastructure and property assets which have been reported as listed or unlisted?

There are multiple ways of investing in infrastructure and property assets, for example through listed vehicles (e.g. REITS) or through unlisted investments (e.g. the direct purchase of property). The method of investing in these assets has an impact on the types of exposure provided. Listed investments typically have a high correlation with equity investments and therefore offer limited protection in the event of an equity market downturn. APRA has accordingly classified these assets as 100% growth.

While unlisted real asset investments are sensitive to economic conditions, they also demonstrate some characteristics associated with defensive assets, such as income generation. To account for the slightly more defensive nature of unlisted assets, APRA has categorised these assets as 75 per cent growth and 25 per cent defensive.

16. Can APRA disclose the index level data so that calculations can be re-performed?

No. Index level data are subject to confidentiality under the terms of the licensing agreements with the index providers.

17. How can APRA be confident that the data underpinning the Heatmap is correct?

The Heatmap uses data reported to APRA by trustees under the Financial Sector (Collection of Data) Act 2001. In addition to the legal obligations that apply to the provision of this data, a number of reporting forms, such as SRF 533.0 Asset Allocation and SRF 703.0 Fees Disclosed are also subject to audit requirements. APRA has also required trustees to address anomalies it has identified.

18. How has APRA ensured that the Heatmap is based on fees gross of tax?

APRA undertook analysis of Product Disclosure Statement (PDS) information against data reported to APRA to assess its consistency and in particular whether fees were reported gross of tax, in line with the reporting instructions. Where anomalies were identified, APRA issued data queries and where necessary trustees resubmitted SRF 703.0 to report fees on a gross of tax basis; others confirmed their original data submission as having reported on a gross of tax basis.

The Heatmap is therefore based on data reported to APRA for fees that are gross of tax, following confirmation with trustees.

19. Given APRA has made assumptions in its methodology, doesn’t this mean the performance of some entities to which they apply is under (over) stated?

APRA’s assumptions have relevance for a small minority of trustees, largely limited to the way the trustee has completed SRF 533.0. APRA has applied sensitivity analysis to its assumptions and determined that the performance of these products are only marginally affected; whilst the shade of colour shown in the Heatmap would change marginally, the overall conclusions regarding the performance of the product would not materially change.

 

FAQs related to previous versions of the MySuper Product Heatmap can be found here.

 

For more information

Email MemberOutcomes@apra.gov.au or mail to

Senior Manager Member Outcomes
Australian Prudential Regulation Authority
GPO Box 9836, Sydney NSW 2001