APRA increases transparency of Choice super products with latest heatmap

The Australian Prudential Regulation Authority (APRA) has published its latest Choice Heatmap, shining a light on member outcomes in the superannuation product segment where investment options are actively chosen by consumers. 

The Choice Heatmap covers 163 products¹, representing $292 billion worth of members’ benefits at the end of June 2022 and nearly half of funds under management in the Choice accumulation sector. The heatmap compares products across key metrics including investment returns, fees and costs, and product sustainability.  

 The heatmap shows an improvement on the 2021 Choice Heatmap: 

• One in five Choice investment options with an eight-year history has significantly underperformed the heatmap benchmarks. Of the 407 investment options with an eight-year history, 182 underperformed the benchmarks. This includes 80 options that underperformed the benchmarks by more than 0.5 per cent. By comparison, in the 2021 Choice Heatmap, one in four Choice investment options significantly underperformed the benchmarks². 

The heatmap also shows that Choice products closed to new members are more likely to underperform and have higher fees that those that are open: 

• Two-thirds of Choice investment options that are closed to new members had poor or significantly poor performance relative to the heatmap benchmarks. The heatmap showed 22 investment options (28 per cent) underperformed the benchmarks by up to 0.5 per cent, while a further 31 (39 per cent) significantly underperformed by 0.5 per cent or more.  
  
   
• Average fees are higher in Choice products that are closed to new members. The average annual administration fee for members with an account balance of $50,000 in closed Choice products was $225, compared with $149 for open Choice products and $137 for MySuper products. 

APRA Deputy Chair Margaret Cole said: “APRA is driving continuous improvement, accountability and transparency in superannuation to deliver better outcomes for members.  

“While the data shows some improvement in the performance of Choice accumulation products, the fact remains that there are still far too many products delivering sub-standard investment returns to fund members. 

“As a result, APRA’s supervision of poorly performing Choice products will intensify, and trustees can expect even greater scrutiny of their product offering. Trustees with products that are underperforming or have unjustifiably high fees – or both – will need to explain why they haven't already moved their members to products with better performance and better fee structures.” 

Ms Cole noted that some members may choose to stay in closed investment options because of non-performance related benefits, such as insurance offerings, or based on appropriate financial advice. 

“Even so, APRA encourages all superannuation members to check whether they are satisfied with the outcomes they are getting from their chosen investment strategies,” she said. 

The heatmap and accompanying Insights and methodology papers, are available on the APRA website at: Superannuation heatmaps.

Footnotes

¹The heatmap covers 47 per cent of funds under management in the Choice accumulation sector. It focuses on investment pathways that are available through accumulation products and through generic investment menus, and which are ultimately invested in multi-sector investment options. It includes investment pathways open to new members and those with existing members but which are closed to new members but have existing members.  

² The 2021 Choice Heatmap was based on data from SuperRatings, whereas the latest heatmap used data collected by APRA directly from superannuation entities.