The Australian Prudential Regulation Authority (APRA) has published its first heatmap providing assessments of the performance of every MySuper superannuation product.
The MySuper Product Heatmap provides additional transparency on the outcomes being delivered by all trustees providing MySuper products. It is designed to lift industry practices and enhance member outcomes by publicly identifying which MySuper products are underperforming and the areas they need to improve.
It uses a graduating colour scheme to provide credible, clear and comparable insights into MySuper products across three areas: investment performance, fees and costs, and sustainability of member outcomes.
APRA Deputy Chair Helen Rowell said the heatmap was a major step forward for industry transparency and accountability.
“Australia’s superannuation system delivers sound outcomes for most members, but APRA is determined to weed out the industry’s underperforming tail,” Mrs Rowell said.
“Since releasing an information paper and sample heatmap last month, APRA has engaged with industry to ensure trustees understand the heatmap, and how they should use it to improve member outcomes.
“In particular, we directly contacted the trustees of the worst performing products and asked them to provide or update action plans outlining how they will address identified weaknesses. If they are unable to make substantial improvements in good time, we will consider other options, including pressuring them to consider a merger or exit the industry.
“However, no-one should be complacent. We expect all trustees to use the heatmap to reflect on the drivers of their current performance, and identify where they can do better.”
In conjunction with the heatmap, APRA has published an information paper outlining some of the key insights gleaned from the data, including:
- member outcomes vary widely across the industry, and underperformance is evident across all industry sectors and investment risk profiles;
- higher fees are generally correlated with lower net returns, although there are exceptions;
- more single strategy products outperform the investment benchmarks than lifecycle product stages; and
- low balance accounts are most impacted by administration fees, while high balance accounts are most impacted by percentage-based fees.
APRA intends to refresh the heatmap at least annually, but will update the heatmap in the first half of next year to assist trustees and other stakeholders assess any early improvements being made.
“This is a game changer for the superannuation industry. The heatmap will subject trustees to a new level of scrutiny, and it’s understandable that some in the industry feel uncomfortable,” Mrs Rowell said.
“Creating a single document that robustly assesses the outcomes provided by products with widely different risk profiles and asset allocations has been challenging. We have needed to make certain assumptions with the data in some areas. But we are confident in our methodology and the overall conclusions that can be drawn from the heatmap on areas of relative underperformance of MySuper products.
“We will continue to refine our models and methodology in response to industry feedback. However we stand behind the heatmap as an important piece of work, and a key plank supporting APRA’s key strategic goal of lifting outcomes for superannuation members.”
The heatmap and accompanying Insights Paper can be found at: https://www.apra.gov.au/mysuper-product-heatmap.
APRA's annual fund-level superannuation statistical publication, which informs the heatmap assessments, will be released later today. This publication will be available at: Annual fund-level superannuation statistics.
The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding $6.5 trillion in assets for Australian depositors, policyholders and superannuation fund members.