The final day of the ASFA conference started with speeches from the key superannuation regulator and the Minister for Superannuation. The conference hall was full of attentive delegates and Helen Rowell and Jane Hume made important announcements justifying that attentiveness.
The Deputy Chair of the Australian Prudential Regulation Authority Helen Rowell came to the ASFA Conference with a strong message about the urgent need for the industry and the regulator to address underperforming funds – and to announce a powerful new measure to do this.
Helen started by noting that some underperforming funds require additional intensified supervision. Some funds are addressing their issues while others are exiting the industry – “although in a few cases further action may still be required.”
But APRA also believes public exposure is also needed to help weed out underperformers, and APRA is about to release another tool – their heatmap. This will provide insights into the outcomes being delivered by every MySuper product across the key areas of investment performance, fees and costs and sustainability.
At today’s presentation, Helen released an overview, the metrics, and a sample heatmap. The actual heat map with real up to date super fund data is now locked-down and will be released in a few weeks’ time. There are lots of nervous funds out there!
The heatmap is intended to emphasise underperformance rather than highlight top-performing funds. A row of red across a page sends a message so clear and strong it nearly jumps off the screen. Its ultimate purpose is to galvanise trustees of underperforming funds into action.
Because the heatmap is not intended to be an endorsement of high-performing funds, the assessment of high performance is not shown in green but in white.
APRA will be using its new powers to bring about change. Helen expects some parts of the industry to pushback and critique the heatmap but APRA but will not be distracted from this important task.
The Assistant Minister for Superannuation Senator Jane Hume came to the ASFA Conference with an update on the implementation of the Government’s superannuation policy agenda and showed that she was up to speed on super and current issues.
She also came to the stage dressed in white – and suggested this meant the Government was doing pretty well using APRA’s colour-coded scoring system.
The Minister thanked APRA for their work on underperforming funds and expected APRA’s “shiny new teeth” will help exit them from the industry. She went further and specifically identified that funds with less than $1 billion – often with high operating costs and unsatisfactory member outcomes – will be subject to specific scrutiny.
She was pleased to report that the Protecting Your Super and Putting Members Interests First legislation has been successful in reducing duplicated accounts and unnecessary insurance.
Part of this new legislation means that Australians can be reunited with their super, without them needing to take any action. Super funds have to report and pay ‘inactive low balance accounts’ to the ATO – this includes accounts that have not received a contribution for 16 months and have a balance below $6,000.
The Minister announced that the ATO has received over 2.3 million inactive low balance accounts from super funds, valued at approximately $2.2 billion. The important next step is that the ATO is now working to reunite Australians with these amounts by either transferring it into an active super account or directly into their bank account where the amount is less than $200 or the member is aged over 65 years.
She was very pleased that the ATO have reunited just over 841,000 accounts worth nearly $1.38 billion. This includes approximately 684,000 accounts worth $1.22 billion that have been transferred into an individual’s active super account and approximately 157,000 accounts worth $161 million directly to individuals’ bank accounts. The ATO will be continuing this work throughout November and into the future. On top of this, more than one million people will receive a direct payment in their bank account.
The Minister also addressed the question of fund mergers head-on. She lined up the ‘merger myths’ and demolished them all one by one. Funds with poor quality assets (where are they?), too hard to merge disparate funds (others are doing it), tax uncertainty (the government has fixed) and resistance from shareholders arguments (‘outrageous’) were all addressed.
She also chastised those in the industry who let self-interest – a job or director fees – get in the way of pursuing members’ best interests.
“Now it’s over to industry to do your part.”