The Australian Prudential Regulation Authority (APRA) has increased scrutiny of underperforming superannuation funds with the publication of the first full refresh of its MySuper product heatmap since it was first published last December.
APRA has also released a paper outlining key insights from the updated heatmap and its impact in improving member outcomes.
The paper shows that, in the 12 months since the first heatmap was published:
11 of the MySuper products that underperformed the investment benchmarks have exited the industry;
71 per cent of MySuper members (10 million members) are paying less in total fees and costs; and
an estimated $408m saving in total fees and costs has been achieved.
To further boost industry transparency on underperformance, the insights paper names the poorest performing products across all three categories.
APRA Deputy Chair Helen Rowell said the heatmap had demonstrated its value in holding trustees publicly accountable for the performance of their products and the outcomes they deliver to members.
“APRA is committed to improving retirement savings for everyone. The MySuper product heatmap shines a light on those trustees who are failing their members by charging high fees and not delivering good long-run returns.
“The impact has been immediate in the area of fees and costs, with MySuper members saving hundreds of millions of dollars in fees since the release of the first heatmap. And despite an immensely challenging year with COVID-19, more than half of MySuper products exceeded our investment benchmarks over six years.
“However, the news is not all positive. In particular, we are concerned that some funds identified as the poorest performers 12 months ago remain in that position today,” Mrs Rowell said.
APRA is now reviewing whether, in relation to 10 MySuper products, eight trustees may have failed in their obligations to members of these products, including possible breaches of the Superannuation Industry (Supervision) Act 1993 (SIS Act).
APRA is issuing notices in coming days requiring these trustees to provide information to APRA in relation to the underperformance of some of their MySuper products and the actions being taken to address that underperformance. Following consideration of this information, APRA will determine what further action it will take, including potential use of formal enforcement powers where appropriate.
APRA’s 2020 MySuper product heatmap, Insights Paper, a paper explaining the changes in methodology behind the heatmap and updated frequently asked questions (FAQs) are available at: About the MySuper Product Heatmap.
In addition to publishing the heatmap in Excel and CSV data file formats, APRA has released an online, interactive, web-based tool to help users explore the heatmap more easily. Among its features, the tool allows users to sort using a number of filters, including RSE, MySuper product and more.
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.
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