The prudential regulator’s announcement of a superannuation performance heatmap is causing a stir, especially the issue of its extension to Choice products.
The Australian Prudential Regulation Authority (APRA) has confirmed its plans to publish a heatmap of over a hundred MySuper products in December.
The Financial Services Council (FSC), Super Consumers Australia and Industry Super Australia are divided in their support of the initiative.
The evaluation is designed to emphasise underperformance and provides insights into the outcomes across three main areas of investment performance: fees, costs and sustainability.
APRA deputy chair Helen Rowell says: “The Heatmap is expected to drive improvements in outcomes for members by holding registrable superannuation entity licensees publicly accountable for their performance, and in particular highlighting areas of underperformance.”
Any product that is performing above a determined benchmark for each investment performance or fee metric will be coloured white. Those performing below that benchmark will be displayed in a gradient of yellow to red.
Rowell says: “Each MySuper product is assessed against each metric. So it is entirely possible for a product to be white for some investment performance metrics, yellow for others and red for fees and costs.”
The FSC has urged caution in relation to use of the heatmap to make comparisons between the MySuper products, as the data has been condensed too simplistically.
Sally Loane, chief executive of FSC, says: “The industry was not consulted on the methodology, so we don’t have full understanding of APRA’s approach. This is why we caution against using the information to make a like-for-like comparison of products. We believe it is far more complex, and in some cases problematic.”
Industry Super Australia chief executive Bernie Dean supports the initiative and says the heatmap is the first step to ensuring that customers have the information they need to compare funds.
Dean says: “Too many Australians are still missing out on hundreds of thousands of dollars in retirement savings due to the chronic underperformance of some funds. This is a welcome start but there is more to do.”
Xavier O’Halloran director of Super Consumers Australia at CHOICE agrees: “We hope the transparency these heatmaps bring will help cut off the tail of underperformers and boost the retirement savings of Australians.”
However, Dean is calling for the heatmap to be applied consistently across all sectors.
Dean says: “To truly and effectively tackle chronic underperformance this tool must apply across both the MySuper and Choice sectors and include rigorous benchmarks.”
FSC’s Loane disagrees: “The variation in choice superannuation products in the market makes them significantly more difficult to accurately compare, and there are not currently agreed metrics and standards for how this would occur.”
APRA deputy chair John Lonsdale confirmed that APRA plans to work on this in the near future.
Lonsdale says: “For the time being, the heatmap doesn’t cover the choice sector, but work is underway to address this with the launch last week of our Superannuation Data Transformation.”
APRA says the Superannuation Data Transformation will deliver the most accurate picture yet of the industry.