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APRA updates MySuper heatmap
The Australian Prudential Regulation Authority (APRA) has increased scrutiny of underperforming superannuation funds with its first full refresh of the MySuper product heatmap since 2019.
The heatmap uses a graduating colour scheme to provide clear and simple insights into MySuper products across investment performance, fees and costs, and sustainability of member outcomes.
APRA has now released an online, interactive, web-based tool to help users explore the heatmap more easily. Among its features, the tool allows users to sort by trustee, RSE or MySuper product, as well as filtering for single-strategy or lifecycle products.
Since first published in December 2019, 11 of the MySuper products that underperformed the investment benchmarks have exited the industry, 71% of MySuper members are paying less in fees and costs, and an estimated $408 million worth of savings has been achieved.
APRA Deputy Chair Helen Rowell said the heatmap had demonstrated its value in holding trustees publicly accountable for the performance of their products and the outcomes they deliver to members.
“APRA is committed to improving retirement savings for everyone,” Ms Rowell said. “The MySuper product heatmap shines a light on those trustees who are failing their members by charging high fees and not delivering good long-run returns.
“The impact has been immediate in the area of fees and costs, with MySuper members saving hundreds of millions of dollars in fees since the release of the first heatmap. And despite an immensely challenging year with COVID-19, more than half of MySuper products exceeded our investment benchmarks over six years.”
Not all the news is positive, however. Ms Rowell said APRA is concerned that some funds identified as the poorest performers 12 months ago still remain in that position today.
The new web-based, interactive heatmap tool is available at MySuper Heatmap.
Super Benchmarking Report
Rainmaker’s 2020 Superannuation Benchmarking Report reveals that super funds continue to struggle to match asset class indexes, resulting in some market commentators calling for more super funds to increase their use of low-cost indexing, rationalise their investment choices and lower fees.
Alex Dunnin, executive director of research and compliance at Rainmaker Information, says Australian super funds as a group are good managers of Australian shares, property and cash, but that their performance in managing international shares and bonds is less impressive.
“The trouble is, the asset classes where the superannuation sector is struggling to add value over the capital market indexes represent almost half of all superannuation assets,” Mr Dunnin said.
He also said the report revealed that a third of default MySuper products are tracking below their investment objectives.
Rainmaker’s super fund asset class performance benchmarking review was part of the broader report and had two elements:
- Compare the super fund asset class sector average returns, across more than 900 investment options, to the respective capital market indexes.
- Assess how many investment options in each asset class matched or beat the index.
“A super fund’s active investment management strategy should be purpose-built to earn back the fees and tax margins. If not, super funds should use indexed strategies,” said Dunnin.
MTAA Super and Tasplan merger
By April 2021, super funds MTAA Super and Tasplan will have completed their much-anticipated merger and become Super Spirit.
As Australia’s newest industry super fund, Super Spirit will have almost $23 billion funds under management and around 326,000 members.
The merger follows a successful year for MTAA Super and Tasplan, with both funds receiving Platinum ratings by SuperRatings and winning Best Value for Money funds for 2020.
MTAA Super CEO Leeanne Turner said that with MTAA Super’s strong long-term performance history and Tasplan’s superior customer satisfaction rating and award-winning digital services, Super Spirit will deliver the best of both worlds.
“This isn’t about a big fund absorbing a smaller fund,” Ms Turner says. “It’s about two successful funds coming together to get even better. It’s a true partnership that will provide a better super experience and outcomes to members across the nation.”
Tasplan Chair Naomi Edwards announced Super Spirit members will also see a reduction in administration fees.
“I think Spirit Super nails it,” she said. “Importantly, our name will also set us apart in the market. This will help us grow, compete, and continue pursuing opportunities in the best interests of our members.”
Consultation to modernise business communications
The Australian Government is inviting interested parties to take part in a consultation process that focuses on modernising business communications so all Australians can benefit from the growth in digital technologies.
Consumers and businesses may miss out on the benefits of new technology when old methods of conducting business become entrenched in law and embedded in longstanding regulatory practice. Potentially this could modernise how superannuation is administrated, including by SMSFs.
This is particularly true in the COVID-19 pandemic, which has accelerated the adoption of digital technologies by Australian consumers and businesses and highlighted the need for businesses and consumers to be able to meet their obligations electronically.
A Deregulation Taskforce was set up in July, 2019, to ensure laws and regulatory practices remain relevant and that where regulation is required, it is fit for purpose and has the lightest touch. In June 2020, the Government announced the Taskforce would prioritise modernising business communications to reduce business costs and better reflect the way Australians want to engage and communicate digitally.
The objectives of the consultation are to obtain feedback from stakeholders that will assist the government to:
- identify and categorise the types of business communications that would benefit from technology neutrality changes, including those technology neutrality changes that will lower current compliance costs;
- develop principles to guide subsequent legislative change;
- identify legislative change that may be required to give effect to these principles and improve the technology neutrality for each category of communication;
- address sensitivities and risks associated with technology neutrality; and
- prioritise reform implementation.
The Modernising Business Communications consultation paper can be downloaded from the Treasury website. Public consultation on the paper closes on 28 February 2021.
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