More than 40 per cent of MySuper members have seen a reduction in fees since the Australian Prudential Regulation Authority (APRA) published its MySuper Product Heatmap last December.
APRA today published its first update to the Heatmap to reflect changes in superannuation fees and costs in the six months since the Heatmap was launched. The tool uses a graduating colour scheme to deliver insights into the performance of all MySuper products across three areas: investment performance, fees and costs, and sustainability of member outcomes.
APRA’s analysis of the latest data, summarised in a new Insights Paper, shows products with 6.1 million MySuper members (42 per cent) have lower total fees, resulting in estimated aggregate savings for members of $110 million a year.
However APRA also found that fund administration fees have largely remained static or risen slightly, while the majority of funds that underperformed on fees and costs in the December 2019 Heatmap continue to have relatively high fees.
APRA Deputy Chair Helen Rowell said it’s a promising start, but both APRA and fund trustees must do more to optimise member outcomes.
“The MySuper Product Heatmap was designed to lift outcomes for members by publicly highlighting which funds are underperforming, and the areas where they must improve,” Mrs Rowell said.
“Since publishing the Heatmap last December, APRA has intensified its supervision of underperformers. It’s pleasing to see that millions of members are already paying less in total fees, especially given the additional challenges and operational costs funds have faced in relation to COVID-19. Furthermore, some funds and products have closed, and transferred their members to better performing products.
“At the same time, it’s clear we can’t be complacent. In particular, it’s disappointing to see so many funds still displayed on the Heatmap in shades of red and orange when it comes to fees and costs. Although member outcomes can’t be measured on one factor alone – and superior member services or investment performance may sometimes justify higher fees – trustees should remember that MySuper products are designed to be simple and cost-effective.”
APRA has not yet updated the sections of the Heatmap focused on investment performance and sustainability because material changes in those areas are expected to take longer to manifest.
Mrs Rowell said APRA would continue to take a more intensive supervision approach with the trustees of underperforming funds.
“APRA is writing to the trustees of more than a dozen MySuper products that continue to seriously underperform on fees. The letter will put these trustees squarely on notice that APRA is seriously considering its response to their failure to swiftly address these issues. Any response may include formal enforcement action,” she said.
“Superannuation trustees have a legal duty to promote the financial interests of their members. With access to APRA’s updated Heatmap, as well as their member outcomes assessments and Business Performance Reviews, trustees have no excuse for not understanding how well they are achieving this in comparison to their peers.
“Whether a fund is above average in all Heatmap categories or red across the board, there is always room to improve, and APRA expects trustees to constantly reassess the outcomes they are delivering to members.”
APRA acknowledges that recent financial market volatility will impact investment performance and lead to changes in the outcomes for MySuper members. APRA will consider this when it publishes a complete refresh of the Heatmap later this year.
APRA also continues to advance plans to expand the Heatmap to cover insurance, and also choice products.
The updated Heatmap and accompanying Insights Paper are available on the APRA website at: MySuper Product Heatmap.