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APRA claims heatmap vindication
The Australian Prudential Regulation Authority (APRA) is claiming vindication for its heatmaps, arguing that more than 40% of MySuper members have seen a reduction in fees since the first heatmaps were published last December.
The regulator has today published its first update to the Heatmap reflecting changes in superannuation fees and costs in the six months since the Heatmap was launched.
It said its analysis showed that products with 6.1 million MySuper members (42%) had lower total fees, resulting in estimated aggregate savings for members of $110 million a year.
The announcement said, however, that APRA also found that fund administration fees had largely remained static or risen slightly, while the majority of funds that underperformed on fees and costs in the December 2019 Heatmap continued to have relatively high fees.
Commenting on the update, APRA deputy chair, Helen Rowell said there had been a promising start but more needed to be done by both the regulator and fund trustees.
“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,” she 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.”
Rowell conceded that APRA had 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.
However, she 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.
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.
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TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
32.57 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
32.09 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
27.42 3 y p.a(%)
