Super funds get stern warning to lift performance

SUPERANNUATION funds that are underperforming have been put on notice by the banking regulator they would be booted out if they failed to lift their game.

In a keynote speech on an incoming ratings system which will shine the light on the best and worst performing funds, the Australian Prudential and Regulation Authority’s (APRA) deputy chair Helen Rowell said if trustees did not serve their members’ best interests their days would be numbered.

Funds with high fees and poor returns are to be named and shamed, a move that has angered many within the industry.

Ms Rowell said this included either “forcing them to lift the outcomes they deliver or forcing them out”.

Speaking at the Association of Superannuation Funds of Australia’s annual conference in Melbourne yesterday, Ms Rowell said APRA was due to publish a heatmap in mid-December. It provides insight into every MySuper product – a default super option – and would delve into three keys areas.

This includes investment performance, fees and costs and sustainability.

Choice products – those which members proactively select, such as high growth or balanced – are not yet part of the new ratings system.

However, surprisingly, the new information published on APRA’s website has been designed more for the industry than consumers in order to keep funds accountable.

The heatmap has been set up to provide colour-coding for the three key areas from white through to pale yellow to dark red.

White is the best and red is the worst. It looks at investment performance over three and five-year time periods and examines fees on member balances of $10,000, $25,000, $50,000, $100,000 and $250,000.

The heatmap also examines member accounts and net cash flow measures.

Ms Rowell said average super balances in Australia have climbed steadily year-onyear, and the average super balance was around 3.5 times what is was in 2004.

The gap between male and female accounts was also shrinking, while average funds have returned 6.5 per cent over the past 15 years.

But ASFA’s chief executive officer Dr Martin Fahy warned

“consumers not to jump to the wrong conclusion about this” once they see the map.

“It’s data from over five years and is one of many measures out there,” he said.

“Fund performance is really something that we measure over decades.”

Mr Fahy said there was already various ratings and rankings available within the industry.

“Unfortunately what this is doing is relying on five-year data and three metrics,” he said. “We don’t want a situation where people are unnecessarily upset or overact.”

Dr Fahy said a majority of funds were delivering returns above five per cent per annum and it was significantly higher than keeping cash in the bank.

UNFORTUNATELY WHAT THIS IS DOING IS RELYING ON FIVE-YEAR DATA AND THREE METRICS DR MARTIN FAHY