APRA publishes MySuper heatmap

The Australian Prudential and Regulation Authority (APRA) has released its MySuper heatmap and have contacted trustees of the worst performing products to provide plans on how they will address identified weaknesses.

In an announcement, APRA said that if underperforming funds could not make sustantial improvements within a certain timeframe it would consider pressuring them to consider a merger or exit the industry.

APRA said the ‘MySuper Product Heatmap’ provided additional transparency on the outcomes being delivered by all trustees providing MySuper products.

APRA deputy chair, Helen Rowell, said: “Australia’s superannuation system delivers sound outcomes for most members, but APRA is determined to weed out the industry’s underperforming tail.

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“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.”

APRA also published an information paper that outlined some of the key insights 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.

“Creating a single document that robustly assesses the outcomes provided by products with widely different risk profiles and asset allocations has been challenging,” Rowell said.

“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.”