Super shortcoming revealed

APRA’s new MySuper heatmap shines a spotlight on underperforming funds.

The Australian Prudential Regulation Authority (APRA) has published its first heatmap which assessed the performance of every MySuper superannuation product.

RACQ Financial Advocacy Analyst Nathanael Watts said more than half of Australians have a MySuper product.

“MySuper is the default account created by your super fund if you don’t choose how to invest your superannuation,” Mr Watts said.

“Most MySuper products are simple, cost-effective and have provided good returns to members.”

Mr Watts said the heatmap would weed out underperforming funds which could leave workers worse off at retirement.

“More than $760 billion is held in MySuper products so it’s important that it is invested in a way that provides the best outcomes for members,” he said.

“The heatmap highlights areas for improvement in investment performance and fees across MySuper products and will enable APRA to work with trustees to improve poor performance.”

The heatmap will be updated annually.

What the heatmap revealed

APRA’s heatmap revealed five key findings: 

Investment outcomes are varied

“Returns from MySuper products ranged from 5.1% to 9.5% for single strategy products,” Mr Watts said.

“This is a significant difference as lower return can mean you’re left with less money for retirement.”

Underperformance is evident across all investment risk profiles

“Despite MySuper being developed to make superannuation investment easy for members, there are still a number of underperforming MySuper products in the market,” Mr Watts said.

Single-strategy products outperformed lifestyle products

“Most super products are single-strategy which means the investment strategy will remain the same unless you change it,” Mr Watts said.

“Lifestyle products automatically switch investments strategies based on your age which means they will typically become more conservative as you approach retirement.”

Fees have different impacts according to account balance size 

“If you have an account with a low balance you’ll be impacted by flat fees as you’ll end up paying the same as someone with a high account balance,” Mr Watts said.

“Percentage-based fees will have a greater impact on high account balances as you’ll end up paying a larger amount than someone with a low balance.”

Economies of scales can save you money

“The more accounts a fund manages, the more you can save as account administration fees tend to be smaller for funds with more members,” Mr Watts said.

The information in this article has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in the document is general advice and does not take into account any person’s particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs.