INVESTING

Bad super funds are named and shamed by APRA's heat map

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The blowtorch has been applied to bad MySuper superannuation funds with the launch of a new colour coded heat map from the superannuation fund regulator, APRA.

APRA's heat map makes it easier for superannuation fund members to identify superannuation funds with high fees and chronically low investment returns.

There are currently around 100 MySuper funds but it can be complex to tell the good value, strongly performing funds from the poor funds. You need to work out the fees as well as compare the returns.

This is where APRA's heat map colours help. The worst superfunds are coloured crimson through to yellow to pale yellow to white. The white colour indicates a MySuper product is performing around or above benchmarks for investment performance, fees and costs.

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The heat map is designed to emphasise underperformance and high fees, explained Helen Rowell, the APRA deputy chair.

APRA estimated there is a 6% difference in performance between the top funds (returning 10%pa) and bottom superannuation fund (3.5%pa) over five years. The fees ranged from 0.3%pa up to around 2%pa. The differences can add up substantially over the long term and impact on a member's retirement wealth.

According to the APRA's heat map, members of one corporate superannuation fund, BOC, are paying a hefty 3.79% administration fee on superannuation amounts up to $10,000, taking their total fee up to 4.37%, when the industry average is around 1% to 1.5%

The idea behind the heat map is to turn up the heat on trustees that aren't serving their members' best interests. Ideally it will force them to lift their performance, reduce their fees or forcing them out.

APRA hasn't given MySuper funds an overall assessment but gives each metric or feature a rating. It is possible for a product to be white for some investment performance metrics, yellow for others and red for fees and costs. Investment is divided into sub categories such as four different measures for investment performance

Which funds score the crimson alarm?

When it comes to investment performance for five years, the MySuper funds scoring the poor crimson rating includes funds from Auscoal, AMP Superannuation Savings Trust Anglican National MySuper, Asgard, BT Super For Life, Westpac Group Plan, Christian Super, LUCRF and Perpetual.

When it comes to administration fees, the MySuper funds with crimson alerts include BT's Asgard funds, Colonial First State's First Choice super funds, Equity Trustees' AON, IOOF, One Path, Pitcher Retirement, MLC, Mercer SmartPath, Suncorp and Westpac.

While some super funds are uncomfortable with APRA's new increased scrutiny, arguing they have idiosyncrasies that aren't taken into account.

After the Royal Commission, Rice Warner, says that APRA's heat maps are here to stay and will be expanded over time to incorporate choice investment strategies and retirement products.  Also APRA will review other aspects such as those relating to life insurance.

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Susan has been a finance journalist for more than 30 years, beginning at the Australian Financial Review before moving to the Sydney Morning Herald. She edited a superannuation magazine, Superfunds, for the Association of Superannuation Funds of Australia, and writes regularly on superannuation and managed funds. She's also author of the best-selling book Women and Money.
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