APRA heatmaps show importance of including all fees in super performance tests

THE Australian Prudential Regulation Authority (APRA) has warned of excessive ‘non-investment fees’ revealed in its ‘heatmaps’ that show many for-profit super funds with administration fees “in a sea of red”.

“There is a sea of red for administration fees in the for-profit sector, underlining the importance of including all fees in the Your Future, Your Super performance benchmarks,” Industry Super Australia (ISA) deputy chief executive Matthew Linden said.

“Heatmaps are already having some success in prompting trustees to drive down fees, so it is vital they are expanded to the Choice sector – which has the highest fees.”

However, he said, the Federal Government continued to ignore the regulator and has deliberately excluded administration fees from its new performance benchmark regime. 

Mr Linden said the retail superannuation sector generated much of its $10 billion annual profit “from its lucrative administration fees” and by deliberately carving them out from the performance benchmarks in the Your Future, Your Super legislation the government risked undermining the entire reform package.

He said the government must shift to the more logical net-return measurement – that tests performance based on all fees and charges – not carving out administration fees.   


APRA has strongly expressed how excessive administration fees can impact returns and questioned the justification for asset-based administration fees, favoured in the retail sector. It found some members with a $50,000 balance were paying more than two and a half times higher administration fees than members in other MySuper products.

ISA analysis also shows that the average worker in MySuper products with the highest administration fees will have $158,000 less than those with the lowest fees.

ISA evidence suggested APRA’s heatmaps seem to have already prompted some funds into cutting fees. The success so far underlines the importance of quickly expanding the heatmaps to cover the entire APRA regulated system, Mr Linden said.

He said it was disappointing the roll-out beyond MySuper had been further delayed and would not initially cover the whole Choice sector. The Productivity Commission found the Choice sector was the high-fee tail of the system and littered with dud products.

But the Choice sector remains stubbornly immune to transparency measures and performance testing – with no heatmap coverage, product dashboards delayed for more than seven years, and alarmingly the government admitting to having no timeframe to include 80 percent of the Choice sector in the proposed performance benchmarks.

“The worst performers must be called out and be the target of regulatory action, but there remains some kinks in the heatmap methodology that we look forward to refining with APRA as it uses the heatmaps to road test the new performance benchmark regime,” Mr Linden said.

He said APRA was right to flag pursuing action against funds that had not lifted their performance from last year’s heatmap release – “chronic underperformance should be stamped out no matter where it is found”.




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