The Australian Prudential Regulation Authority (APRA) has released details of the superannuation heatmap it will publish next month, providing insights into the outcomes being delivered by every MySuper product.
Delivering an address to the ASFA 2019 conference in Melbourne today, APRA Deputy Chair Helen Rowell revealed a sample of the heatmap, which will be a key tool in APRA’s ongoing efforts to enhance superannuation member outcomes.
APRA has also released an information paper containing detailed explanations of how it selected the metrics and benchmarks used in the heatmap, and the methodology used to take into account important differences in products’ investment strategy and asset allocation.
The heatmap uses a graduating colour scheme to provide clear and simple insights into MySuper products across three areas: investment performance, fees and costs, and sustainability of member outcomes. For investment performance and fees and costs, MySuper products delivering outcomes below relevant benchmarks are depicted from pale yellow to dark red (see Figure 1 & 2 below). The sustainability measures provide an indication of a trustee’s ability to provide quality member outcomes in the future and address areas of underperformance.
Mrs Rowell said the heatmap represented a major step forward for superannuation transparency and accountability.
“One of APRA’s core strategic priorities is improving member outcomes in superannuation. The heatmap is intended to help drive improvements across the industry by highlighting which MySuper products are underperforming and where they need to improve,” Mrs Rowell said.
“It forms part of APRA’s broader suite of actions to enhance member outcomes, including strengthening the prudential standards, enhancing the superannuation data collection, intensifying APRA’s supervision approach and improving industry transparency.
“Unlike a sea of numbers on a spreadsheet, areas of red in the heatmap send a clear and strong message that is hard to ignore, which is our intent. As much as transparency is important, the ultimate purpose of the heatmap is to have trustees with areas of underperformance take action to address it. To reinforce this, the heatmap will inform APRA’s supervision priorities: trustees can expect APRA’s supervision intensity to reflect the intensity of the colour shading on the heatmap.”
Having released the information paper, APRA will engage with trustees to ensure both the heatmap and APRA’s expectations for its use are well understood. This will include meeting with trustees that the heatmap identifies as having clearly underperforming MySuper products and ensuring they deliver on plans to address this in a timely manner.
“In most cases, this will be a continuation of the supervisory action that APRA has already taken with these entities to address identified areas of poor member outcomes. If trustees don’t fix these issues within a timeframe that is acceptable to APRA, we will be requiring them to consider other options, including a merger or exit from the industry in some cases,” Mrs Rowell said.
The full heatmap will be published on the APRA website by mid-December.
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.