The Australian Prudential Regulation Authority (APRA) is responsible for the supervision of, amongst other regulatory responsibilities, the bulk of Australia’s $3.4 trillion superannuation industry, with around $2.3 trillion currently in APRA-regulated superannuation funds. APRA’s critical role is to ensure superannuation trustees, who manage members’ retirement savings, are doing so in their members’ best financial interest, delivering quality outcomes for their members at all times. This is particularly important given that levels of member engagement with superannuation vary considerably, and a substantial proportion of the population is relatively disengaged.
APRA seeks to fulfil its prudential supervision role in a number of ways, but has recently sought to make much greater use of data and transparency to drive change. One notable initiative has been the publication of the MySuper and Choice Heatmaps, which enable like-for-like comparisons of outcomes being delivered by every MySuper product and a subset of choice products (multi-sector investment options) in the key areas of investment performance and fees. They also provide indicators of trends in a trustee's operations relevant to the sustainable delivery of better member outcomes over time. Three MySuper Heatmaps have been published since it was first released in December 2019. The first Choice Heatmap was published in December 2021.
The Heatmaps were developed after considerable industry consultation and stakeholder engagement. APRA has provided substantial documentation in relation to how the Heatmaps have been constructed, including its underlying source data, to help users understand these aspects.
The Heatmaps have delivered both external and internal benefits. Within the superannuation industry, the Heatmaps seek to foster a culture of continuous improvement by providing clear, credible and useful insights into the outcomes that MySuper products are providing to their members. They allow trustees to compare their performance against peers on a range of metrics, and understand where they need to improve their performance. Internally, the Heatmaps feed directly into APRA’s risk-based supervisory activities. The level of supervisory intensity and oversight reflects the quality of outcomes being delivered by each trustee. This data-driven approach helps APRA supervisors to better identify and target trustees with continued underperformance, who can then be subject to more intense supervisory activity, including, if necessary, the use of enforcement action.
The Heatmaps have already demonstrated their value in holding trustees publicly accountable. Since the first MySuper Heatmap was published, 22 poorly performing products have been closed, and high cost products have seen a reduction in fees charged to their members. In December 2019, one quarter of MySuper products charged total fees and costs of more than $646 per annum for a member with a $50,000 balance. The equivalent figure in December 2021, was $582, a reduction of $65 or more than 10 per cent. The Heatmaps have also provided mainstream media with simple to digest information, enabling the publication of a range of articles drawing attention to the results of the heatmaps and amplifying our efforts.
The Heatmap currently includes 25 metrics for 75 MySuper products and 120 choice products (727 multi-sector choice options). Due to the volume of information, there is a risk that key insights may be lost which would impact the effectiveness of the tool. APRA is therefore continuing to improve how it presents the information contained in the Heatmaps to improve their effectiveness. This includes developing an online, interactive web-based tool to help sort and filter the detailed information in the Heatmap, in addition to the currently available Excel and CSV versions.
These Heatmaps work alongside the Government’s Your Future Your Super reforms which were implemented in 2021, building on the Heatmap concept with more robust performance testing. The reforms reinforce APRA’s ability to be effective in its action against poor performing products – to the ultimate benefit of superannuation members.
To increase transparency and improve retirement outcomes for superannuation members, APRA has developed two new tools for trustees applying across the $2.3 trillion in APRA-regulated funds.
Leveraging data and supporting transparency - MySuper and Choice Heatmaps enable like for like comparisons of outcomes in areas such as investment returns and fees for superannuation products.
Since the publication of MySuper Heatmaps, 22 poorly performing products have been closed and high cost products have seen a reduction in fees charged to their members.