APRA super heatmaps reveal a quarter of choice super products ‘poor’

The Weekend Australian

18-19 December 2021

Richard Gluyas – Business Correspondent

The Australian Prudential Regulation Authority’s review of superannuation member outcomes revealed that poorly performed choice products were concentrated in the hands of eight trustees.

More than 60 per cent of investment options in the prudential regulator’s first heatmap for the choice superannuation sector failed to meet benchmarks, with one-quarter delivering “significantly poor performance”.

The choice sector, where members make an active decision to invest and have a wide range of investment options, is now expected to go through the same process of product closures and fee reductions as the MySuper sector after publication of its first heatmap in 2019.

Since then, 22 MySuper products, comprising 1.3 million member accounts and $41.8bn in member benefits, have closed, with three of them failing the new “Your Future, Your Super” performance test this year.

The Australian Prudential Regulation Authority’s review of superannuation member outcomes, released on Thursday, also revealed that poorly performed choice products were concentrated in the hands of eight trustees.

Of the eight, Christian Super, EISS and Australian Catholic Super had a MySuper product that failed the performance test as well.

In aggregate, the two heatmaps cover about 60 per cent of member benefits in the $3.4 trillion, APRA-regulated super sector. The inaugural choice heat­map focuses on multi-sector investment options in open, accumulation products, excluding platforms, representing 40 per cent of total member benefits – about $394bn – in the choice ­segment.

APRA executive board member Margaret Cole said the regulator would now intensify its supervision on the trustees of products delivering substandard member outcomes, with the new choice heatmap expected to have a similar impact to the MySuper exercise.

“With a legal duty to act in their members’ best financial interests, all trustees should now be scrutinising the heatmap findings to assess the outcomes they are delivering members, better understand any drivers of poor performance and then taking prompt action to address areas of concern,” Ms Cole said.

“If they are unable or unwilling to do so, they need seriously to reconsider whether their members would be better served with their money elsewhere.”


Superannuation members also deserved to have confidence that their retirement savings were being well looked after, regardless of what type of fund or product their money was invested in.

“Although there have been benefits generated for members from industry consolidation and reductions in fees in recent years, these heatmaps show there remains considerable room for ­improvement in member outcomes,” she said.

“In particular, a sizeable proportion of the choice sector has been exposed for delivering poor outcomes, especially considering these products generally charge higher fees than their MySuper equivalents.”

The key findings from the latest refresh of the MySuper heatmap were that 45 per cent of products, or 31 of 69, delivered returns below APRA’s heatmap benchmarks.

Investment returns were found to be the main driver of underperformance and while fees and costs were falling, there was still “considerable scope” for more reductions.

The heatmap incorporated 75 MySuper products covering 14.2 million member accounts and $853bn in member benefits.

The first annual Your Future, Your Super performance test for MySuper products was conducted in August, consisting of an assessment of investment performance and administration fees.

The test found that 13 MySuper products failed, comprising one million member accounts and $56bn in benefits.

A further seven default products only “marginally passed” the performance test, including $67bn industry fund Rest Super, which has 1.8 million members.

Most of Rest’s members are in the default product.

APRA said it expected trustees to improve the performance of all underperforming products “in a timely manner” to protect all members. “This is particularly the case where the product has failed consecutive performance tests and becomes closed to new members, which may result in further sustainability challenges for the trustee,” the regulator said.

APRA said the impact of staying in a poorly performed superannuation fund was significant.”