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APRA heatmap sees members save on fees

APRA analysis shows a significant proportion of MySuper members have been spared more than $100 million in fees in the last six months thanks to the introduction of its heatmap.

Updating its MySuper heatmap to reflect changes in the fees charged, APRA said products with 6.1 million MySuper members - or 42% - have seen the total fees charged to them by their fund decrease by an average of $33 per annum since the release of the inaugural heatmap in December last year.

Now, the estimated weighted-average total fees and costs paid per member accounts across all balances is $518, down from $525 in December.

It represents an estimated net saving to members of $110 million, or 1.4% of estimated total MySuper fees and costs paid.

That said, 3.8 million members saw their funds increase fees over the period by an average of $24 per annum.

Those funds that were found to be charging relatively high fees, namely administration fees, in December 2019 continue to do so now and have more work to do, APRA said.

"At an aggregate level, the MySuper products with the highest total fees in December 2019 have lowered their fees over the last six months. However, for most of these the reduction was not sufficient to improve the position of the MySuper products relative to others, so they remain underperforming," APRA said.

APRA said some trustees sought to justify the higher fees they charge on the basis that they offer a 'premium' service to members.

"APRA expects that trustees are able to demonstrate that services and fees and costs charged are consistent with the original intent of MySuper products - that they are simple, cost effective and well-designed products that contain basic features required by most members, and take appropriate action if not," the report reads.

For account balances of $10,000, the proportion of MySuper products with no colour in this iteration increased to 61% from 59% six months ago, while the proportion of products considered to be above the threshold level for significant underperformance - and therefore copping a crimson rating - has decreased from 9% to 7%.

According to the heatmap, Goldman Sachs and JBWere Superannuation has the highest fees, with admin fees for a $10,000 balance sitting at 3.79% and total fees at 4.37% - same as they were in December. Admin fees and total fees on a $50,000 balance also remain unchanged at 0.91% and 1.49% respectively.

Other funds deemed above the threshold level by APRA include First Super, IOOF and IAG & NRMA Superannuation.

Meanwhile, Media Super - currently exploring the possibility of a merger with Cbus - fared well, as did the likes of Energy Super, AMIST Super, HESTA, NESS Super, Vision Super and MTAA Super. Despite increasing fees since December, VicSuper is also considered to be among the cheapest offerings.

Covering 90 MySuper products in total, the update does not include investment performance or sustainability as the regulator expects material changes in this area to take longer to manifest, and for COVID-19 to have an impact. It also doesn't account for insurance premiums.

"Since publishing the heatmap last December, APRA has intensified its supervision of underperformers. It's pleasing to see that millions of members are already paying less in total fees, especially given the additional challenges and operational costs funds have faced in relation to COVID-19. Furthermore, some funds and products have closed, and transferred their members to better performing products," APRA deputy chair Helen Rowell said.

At the same time, there is no room for complacency, she added.

"In particular, it's disappointing to see so many funds still displayed on the heatmap in shades of red and orange when it comes to fees and costs. Although member outcomes can't be measured on one factor alone - and superior member services or investment performance may sometimes justify higher fees - trustees should remember that MySuper products are designed to be simple and cost-effective," Rowell said.

Again, APRA reinforced that trustees of consistently poor performing funds, or funds with sustainability challenges, should strongly consider options to merge or exit the industry.

Nine MySuper offerings have ceased since the first heatmap in December, according to the report. These include the transfer of Club Super accounts to Hostplus and several AMP products.

Read more: APRAMySuperFirst SuperGoldman Sachs and JBWereHelen RowellMedia SuperMTAA Super
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