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The Australian Prudential Regulatory Authority (APRA) has released its latest Choice Heatmap to help people in a ‘Choice’ superannuation investment option — where a member chooses how their money is invested — navigate where best to put their money.
This year’s heatmap showed while there had been an improvement in Choice products compared to last year, APRA was still planning to crack down on Choice options that weren’t up to scratch
The Heatmap covers 68 registrable superannuation entities (RSEs), representing $292 billion of members’ benefits or 47 per cent of the accumulation phase of the Choice sector.
Key takeaways
APRA found one in five Choice investment options with an eight-year history had significantly underperformed the heatmap benchmarks.
This year, out of the 407 investment options with an eight-year history, 182 underperformed the benchmarks, with 80 options underperforming by more than 0.5 per cent.
For comparison, last year, one in four options significantly underperformed the benchmarks.
The map also found closed Choice investment options were more likely to underperform and had higher fees compared to open Choice products.
The heatmap found two-thirds of closed Choice investment options had poor or significantly poor performance relative to the benchmarks, with average fees for members being higher at $225 compared to $149 for open Choice products and $137 for MySuper products.
Crackdown on Choice products
APRA is stepping up its supervision of poorly performing Choice products and will increase scrutiny of their product offerings.
Trustees with underperforming or unjustifiably high-fee products will now be required to explain why they haven’t moved their members to better options.
“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,” APRA Deputy Chair Margaret Cole said.
“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.”
The heatmap can be found on the APRA website.
