The Australian Prudential Regulation Authority (APRA) has sharply lifted transparency around superannuation member outcomes with the publication of its first Choice Heatmap, alongside the annual MySuper Heatmap.
The Choice Heatmap, which captures products and options in which members have made an active decision to invest, represents the first time the performance of this segment of the market has been exposed to such public scrutiny. The MySuper Heatmap, meanwhile, which was first published in 2019, has been expanded to include each product’s assessment result received under the new Your Future, Your Super Performance Test.
In aggregate, the two heatmaps cover 60 per cent of member benefits in the APRA-regulated superannuation sector. Alongside each heatmap, APRA has also published an insights paper highlighting key findings plus two technical papers with more detailed findings.
The inaugural Choice Heatmap focuses on multi-sector investment options in open, accumulation products (excluding platform products), representing 40 per cent of total member benefits in the APRA-regulated choice sector. APRA intends to leverage its Superannuation Data Transformation to further refine and expand its Choice Heatmap over coming years to cover more of the sector.
Key insights from the latest refresh of the MySuper Heatmap include:
- 45 per cent of MySuper products (31 out of 69) delivered returns below APRA’s heatmap benchmarks;
- 22 MySuper products have closed since the release of the first MySuper Heatmap; of those 22 products, three failed the Your Future, Your Super performance test in 2021;
- investment returns are the primary driver of underperformance; and
- fees and costs for MySuper products are declining, but there remains considerable scope for further reductions.
APRA’s analysis of the Choice Heatmap shows:
- 60 per cent of investment options in the Choice Heatmap delivered returns below APRA’s heatmap benchmarks over seven years, with over 25 per cent of options delivering significantly poor returns;
- performance of choice products varies considerably more than MySuper products; and
- fees and costs of choice products are considerably higher than MySuper products, without obvious benefit in financial outcomes for members.
Executive Board Member Margaret Cole said APRA would now further intensify its supervision on the trustees of products that had been shown up on the heatmaps as delivering sub-standard member outcomes.
“Superannuation members deserve confidence that their retirement savings are being well-looked after, regardless of what type of fund or product their money is invested in.
“Although there have been benefits generated for members from industry consolidation and reductions in fees in recent years, these heatmaps show there remains considerable room for improvement in member outcomes.
“In particular, a sizable proportion of the choice sector has been exposed for delivering poor outcomes, especially considering these products generally charge higher fees than their MySuper equivalents,” Ms Cole said.
Ms Cole said APRA expected the new Choice Heatmap to have the same sort of impact as the MySuper Heatmap, which has contributed to fees falling and 22 products merging or exiting the market since it was published at the end of 2019.
“With a legal duty to act in their members’ best financial interests, all trustees should now be scrutinising the heatmap findings to assess the outcomes they are delivering members, better understand any drivers of poor performance and then taking prompt action to address areas of concern. If they are unable or unwilling to do so, they need seriously to reconsider whether their members would be better served with their money elsewhere,” she said.
The MySuper and Choice Heatmaps, and accompanying information papers, are available on APRA website at: Superannuation heatmaps.