Superannuation fund offerings will be rated red, amber or green when the prudential regulator publishes individual performance assessments for the first time.
The Australian Prudential Regulation Authority has never publicly appraised the performance of individual funds or products, save for recent announcements about licence conditions imposed on IOOF and AMP.
But that will change when APRA later this year releases assessments of fund performance in at least four key areas – net returns, fees and costs, insurance and "sustainability". The sustainability measure will consider fund features such as demographics, and inflows versus outflows.
The Australian Financial Review understands that APRA will use a system of traffic light colours to make it clear how products rate on each of the measures. A fund might be "green" on net returns but "red" on their insurance policy, for example.
"We will report metrics relative to a number of both absolute and relative benchmarks," APRA deputy chair Helen Rowell told a parliamentary inquiry on Friday.
"And the way we will present the information will make very clear the performance of individual entities relative to those benchmarks."
APRA will begin with the 100 or so MySuper products on the market before moving into the more complex choice segment, where there are tens of thousands of products on offer.
"We are looking to increase the data that we collect across the whole of the industry and also to get more granular information, particularly on expenses and choice products," Mrs Rowell told the House of Representatives Economics Committee.
"And we will increase the publication of that information and the performance, based on different benchmarks, as we improve the data that we have available to do that."
For the nearly 30 years that compulsory super has operated, regulators have never nudged consumers toward any particular product. If adopted, the Productivity
Commission's "best in show" shortlist would send a game-changing signal to the market about fund quality.
The government has yet to fully respond to the commission's recommendations, although it did support recommendations by the Samuel review that APRA focus on member outcomes and publish objective benchmarks against which to compare product performance.
The commission struggled to get some funds to report the right data, and in full, to create benchmarks but APRA has the power to penalise organisations that refuse to comply.
Mrs Rowell also confirmed that almost all of the 30 funds previously identified as underperformers had been dealt with.
"The action on the underperforming tail is well in train," she said. "In the last 18 months we have worked very hard with a cohort of close to 30 funds to either have them exit or improve their outcomes."
Australian Institute of Superannuation Trustees chief executive Eva Scheerlinck said the provision of clear comparisons of performance across all products was long overdue.
"In particular, we welcome the regulator’s move to develop objective performance benchmarks so that industry stakeholders and, ultimately, consumers can better understand how individual super funds are performing and if they are getting value," she said.
"Australians who are in dud super funds are being kept in the dark. In a compulsory super system this is unacceptable."
Super Consumers Australia policy adviser Cameron Sinclair said the "gaping holes in publicly available performance data are absurd".
He said APRA's task, beyond publishing information about performance, was to remove laggards from the system.
"Thousands of new MySuper accounts continue to be created in products that rank in the bottom 25 per cent of performers," Mr Sinclair said.
"The Productivity Commission modelled that being defaulted into a bottom quartile MySuper product would see a typical member $502,000 worse off in retirement."
By Joanna Mather
13 August 2019