Australians will soon be able to compare super funds based on a new three-tier rating system.
The system will assign red, amber or green ratings to individual components of MySuper (or default) funds, rating returns, insurance, fees and fund sustainability to better show how the fund performs.
The financial regulator, APRA, has not yet provided any commentary or explanation on the system as the plans are still in development, but confirmed to The New Daily that a report in The Australian Financial Review about the new system was “accurate”.
Speaking before a parliamentary committee, however, APRA deputy chair Helen Rowell said the regulator is currently working to “enhance the information” it publishes on fund performance.
“By the end of the year, we will put out some more material and, progressively, we will increase the information that we put out, which will analyse performance based on a number of different metrics in key areas – net returns, season costs, insurance and what we call sustainability measures,” she said.
‘Strong case’ for comparison tools
Australian Institute of Superannuation Trustees’ (AIST) chief executive Eva Scheerlinck said fund members should be able to make informed decisions about their retirement savings, and making relevant information easier to use is critical to achieving that goal.
“AIST believes there is a strong case for the government to produce a consumer-friendly, super fund comparator tool using regulator-approved data. This tool could then be used by anyone who wants to check on their fund, and consumers would be confident that the data was independent,” she said.
“Super funds should be required to report fees and net returns on all products in a comparable and standardised way. This should be available on an independent, user-friendly comparison website.”
Publishing performance benchmarks is a “significant step in the right direction,” Ms Scheerlinck said.
More action needed on choice funds
Bernie Dean, chief executive of Industry Super Australia, told The New Daily the new reporting system was a welcome change, but added that whichever system APRA uses needs to be applied to choice products as well as default MySuper accounts.
“We know that underperformance is not limited to MySuper products – in fact, it is more prevalent in the choice sector,” he said.
“Consumers should be able to look at different funds and products, and have confidence they are comparing apples with apples, with a standardised approach across the entire system.”
Ms Scheerlinck agreed, noting the Productivity Commission’s review of super found 36 per cent of choice funds had underperformed using the benchmark for returns (almost all of which were offered by retail funds).
“While we accept that MySuper is the obvious place for APRA to commence its work on performance, it needs to move quickly to extend this work to the choice sector, where underperformance is rife,” she said.
“This is of critical importance to the members of the underperforming choice sector, where more than $1 trillion in members’ savings is invested, nearly twice the funds under management in the more transparent and highly-regulated MySuper sector.”
The New Daily is owned by Industry Super Holdings