APRA Heatmap Flashes Lacklustre Super Funds & Open Banking Disruption

  • Dec 21, 2019 AEDT
  • Team Kalkine
APRA Heatmap Flashes Lacklustre Super Funds & Open Banking Disruption

As Australians, Super Funds are a part of our lifetime savings that will be very crucial as we grow old, and preserving our savings with decent return accumulation should be on the agenda for each one of us.

With open banking project set to sail early next year, the heatmap released by the Australian Prudential Regulation Authority (APRA) could be a turning point in gigantic superannuation reserves of our country, and indeed your MySuper.

All About MySuper

An Australian Government initiative, MySuper is a default superannuation scheme for Australian workers. It aims to provide a cost-effective retirement fund having a basic feature for a working-class population. The major fees charged in MySuper initiative includes investment fees, administration fees, switching fees, exit fees, and contributing service.

According to the Association of Superannuation Funds of Australia, the superannuation assets of Australia were at $2.9 trillion at the end of September quarter, depicting an increase of 7.1 per cent from the September 2018.

Out of total assets, MySuper assets were $779 billion for the September quarter, equating to an increase of 12.1 per cent over the same period in the previous year.

Lens through APRA’s Heatmap

A first of its kind, the heatmap released by the prudential regulator is a watershed moment for working-class population and even the ones, who are retired.

The heatmap has revealed the funds that have been charging higher fees with lacklustre returns.

The assessment, which evaluates the performance of super funds, was published for the MySuper superannuation products.

It provides transparency to the results delivered by fund administrators, and it is intended to lift the performance standards, enhance member outcomes by revealing underperforming products.

Heatmap assesses the product based on sustainability of member outcomes, fees and costs, and investment performance. It is a major step forward for the industry’s accountability and transparency. And it is likely to bring more competition in the industry.

Helen Rowell, APRA Deputy Chairman also disclosed that underperforming administrators or trustees were contacted and directed to provide the steps taken by them to improve the identified deficiencies.

And, she said if improvements are not noticed in a time-bound manner, the regulator would be considering options, including a merger or exit from the industry. APRA need trustees to review heatmap to reflect the performance and identify areas that could be improved.

APRA in a separate information paper noted that;

  • Member outcomes vary across industry, and underperformance is evident across the industry.
  • Despite exceptions, higher fees and lower returns are correlated.
  • Single strategy products have outperformed investment benchmarks compared to lifecycle products.
  • Low balance amounts are impacted by administration fees and high balance accounts by percentage-based fees.

The prudential regulator would be refreshing the heatmap annually. However, the heatmap would be updated in the first half of next year that would allow evaluating the early enhancements made by trustees.

APRA believes that this development is a game changer for the Superannuation industry. The development of uniform criteria to assess the performance of the funds was a critical project, and the regulator would be refining its criteria continuously.

Transfer Super Funds via Open Banking

In December 2018, the Productivity Commission had criticised the efficiency of the superannuation industry with ramifications leading up to the APRA heatmap for super funds.

The commission delivered a brief report on the superannuation industry competitiveness with recommendations.

In October this year, the Senate Committee suggested the Consumer Data Right (CDR) extension to super funds.

If the suggestion is to materialise, this will facilitate the transfer of superannuation data to other super funds upon switch, which could be favourable at retirement. This could allow providers to offer products that are beneficial for the member, in turn, delivering sustainable outcomes possibly.

Customers would be able to differentiate between products based on cost, value and appropriate deals. The suggestion by the Senate Committee on FinTech and RegTech comes through an issue paper, which is seeking written submissions to its inquiry by 31 December 2019.

The issue paper, through feedback, suggests that integrating CDR with superannuation funds could result in outcomes, including information on fees charged by the funds, and enhance the customers understanding of insurance cover provided by super funds.

Since Haynes Royal Commission has delivered its report, the shift from retail and self-managed super funds to industry super funds has been gathering momentum, this shift has the prowess to drive effective corporate governance in the portfolio companies of the industry funds.

Some Worst & Best Performing MySuper Funds

Among the largest super funds in the country, AustralianSuper leapfrogged in its membership additions in the year 2018-19 after recording an increase of around 413k new members.

As an active investor, AustralianSuper has delivered lofty returns, while exercising its rights and responsibilities of being a large shareholder in companies. The fund’s proactive engagement with companies and influence on company boards intends to seek positive behaviours that could be favourable for investment outcomes.

The below data is taken from APRA heatmap, and it only lists the notable administrators/trustees who have been running multiple plans.

Worst performing RSE licensees based on 5-Year (Net Investment Return) NIR relative to Simple Reference Portfolio p.a.;

  • AMP Superannuation Limited
  • AUSCOAL Superannuation Pty Ltd
  • BT Funds Management Limited
  • Christian Super Pty Limited
  • Energy Industries Superannuation Scheme Pty Ltd
  • U.C.R.F. Pty. Ltd.
  • LGSS Pty Limited
  • Maritime Super Pty Limited
  • M. Superannuation Proprietary Limited
  • Perpetual Superannuation Limited

Best performing RSE licensees based on 5-Year (Net Investment Return) NIR relative to Simple Reference Portfolio p.a.;

  • QSuper Board
  • Unisuper Limited
  • United Super Pty Ltd
  • AustralianSuper Pty Ltd
  • First Super Pty Limited
  • Tidswell Financial Services Ltd
  • BEST Superannuation Pty Ltd
  • Statewide Superannuation Pty Ltd
  • Australian Ethical Superannuation Pty Ltd

Worst performing RSE licensees based on 5-year Net Investment Return (NIR) p.a.;

  • AMP Superannuation Limited
  • BT Funds Management Limited
  • Christian Super Pty Limited
  • Perpetual Superannuation Limited
  • LGSS Pty Limited
  • AUSCOAL Superannuation Pty Ltd

Best performing RSE licensees based on 5-year Net Investment Return (NIR) p.a.;

  • Equity Trustees Superannuation Limited
  • QSuper Board
  • Host-Plus Pty. Limited
  • BEST Superannuation Pty Ltd
  • AustralianSuper Pty Ltd
  • LGSS Pty Limited

RSE licensees charging highest Total fees ($10,000 account balance);

  • BEST Superannuation Pty Ltd
  • First Super Pty Limited
  • Mercer Superannuation (Australia) Limited
  • BUSS (Queensland) Pty Ltd
  • O.O.F. Investment Management Limited
  • Club Plus QLD Pty Ltd
  • Maritime Super Pty Limited
  • Pitcher Retirement Plan Pty Ltd

RSE licensees charging highest total fees ($50,000 account balance);

  • BEST Superannuation Pty Ltd
  • Guild Trustee Services Pty. Limited
  • First Super Pty Limited
  • Mercer Superannuation (Australia) Limited
  • Club Plus QLD Pty Ltd
  • T W U Nominees Pty Ltd
  • Christian Super Pty Limited
  • Maritime Super Pty Limited
  • Pitcher Retirement Plan Pty Ltd

Some of the highest return generating MySuper products based on 5-Year (Net Investment Return) NIR p.a.;

  • Aon MySuper
  • QSuper Lifetime
  • Balanced option
  • Goldman Sachs & JBWere Superannuation Fund MySuper Product
  • Aon MySuper
  • AustralianSuper MySuper
  • MySuper Age Based Investment Strategy
  • Max Super Fund MySuper Plan

Some of the lowest return generating MySuper products based on 5-Year (Net Investment Return) NIR p.a.;

  • Aon MySuper
  • Asgard Employee MySuper
  • Westpac Group Plan MySuper
  • BT Super for Life MySuper; BT Lifetime Employer MySuper
  • QSuper Lifetime
  • AUSCOAL - Default Lifecycle
  • Anglican National MySuper
  • Westpac Group Plan MySuper
  • BT Business MySuper
  • CCA MySuper

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