APRA Releases Heatmap to Assess Performance of Superannuation Products
APRA published the first heatmap providing assessments of the performance of every MySuper superannuation product, along with the frequently asked questions that provide guidance for understanding the heatmap. The primary users of the heatmap will be the registrable superannuation entity (RSE) licensees. However, the insights the heatmap provides will benefit a wide range of stakeholders, including policymakers and advisors. APRA intends to refresh the heatmap at least annually, but will update the heatmap in the first half of next year to assist trustees and other stakeholders in assessing any early improvements being made. APRA also published the Data Insights paper that outlines key insights gleaned from the heatmap data.
The MySuper Product Heatmap provides additional transparency on the outcomes being delivered by all trustees providing MySuper products. It is designed to lift industry practices and enhance member outcomes by publicly identifying which MySuper products are under-performing and the areas they need to improve. The heatmap uses a graduating color scheme to provide credible, clear, and comparable insights into MySuper products across three areas: investment performance, fees and costs, and sustainability of member outcomes. The key insights from the data include the following:
- Member outcomes vary widely across the industry and under-performance is evident across all industry sectors and investment risk profiles
- Higher fees are generally correlated with lower net returns, although there are exceptions
- More single-strategy products outperform the investment benchmarks than life-cycle product stages
- Low-balance accounts are most impacted by administration fees, while high-balance accounts are most impacted by percentage-based fees
APRA is integrating the heatmap into its risk assessment and supervisory intensity model, which is aligned with its new enforcement approach. This ensures that the insights provided in the heatmap lead to a level of supervisory intensity and oversight that appropriately reflects the quality of the outcomes being delivered by each registrable superannuation entity licensee. In developing the heatmap, APRA has included metrics that reflect outcomes relative to peers and appropriate benchmarks. For investment performance, measures of performance relative to benchmark portfolios provide additional insights into the value that registrable superannuation entity licensees add in setting and implementing the investment strategy for their MySuper products.
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Keywords: Asia Pacific, Australia, Insurance, Superannuation, Pensions, Heatmap, MySuper Product, RSE Licensee, APRA
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