The Australian Prudential Regulation Authority (APRA) has said there is scope for superannuation licensees to further reduce their fees and emphasised the benefits of scale.
The regulator has released a new insights paper on its performance test in August, which saw 96 trustee directed products (TDPs) fail to meet the benchmark alongside one failed MySuper product, AMG Super.
APRA underlined the “significant variance” in administration fees paid by fund members within every product segment.
“While fees have declined for MySuper products on average, there is scope for registrable superannuation entity (RSE) licensees to reduce fees further,” the paper said.
TDPs have the most considerable scope for fee reductions, according to APRA.
Some 53,000 member accounts holding $1.1 billion in member assets are currently in TDPs with administration fees over 0.5 per cent above the administration fee benchmark.
“This creates an imperative for RSE licensees to outperform their return benchmarks to pass the performance test.”
The paper also reiterated the importance of scale within the super industry, which enables larger funds to charge lower fees.
APRA encouraged smaller funds to reconsider what action they can take to better serve their members’ financial interests and provide value for money, including transferring their members to better performing products or RSEs.
“Persistently high administration fees and costs erode the balances of members that compound over a long period of time, which will ultimately be detrimental to members’ retirement outcomes.”
Margaret Cole, APRA deputy chair said: “Today’s publications represent an additional step towards providing the superannuation industry and their members with more detailed analysis of the performance of MySuper and trustee directed products in the performance test.
“We expect trustees to analyse these results carefully, and – where they have products that are consistently underperforming – take firm action to improve outcomes for their members.”
She added that APRA will intensify its super performance transparency even further in 2024 by aligning the timing of the test with heatmap publications.
