National Australia Bank stands accused of keeping more than 300,000 customers idling in a default product with high fees and poor performance, instead of transitioning them to a lower cost MySuper product.
All super fund members have the right to know if their super fund is dud.
This is just as important for members of Choice funds as it is for default funds. AIST research suggests that, on average, members of Choice products are likely to be $50,000 worse off at retirement compared to members of MySuper products.
So, it is pleasing to see APRA finally recognise the need to begin collecting data on Choice super products. This data will – eventually – be included in the regulator’s colour-coded heatmap benchmarking, currently limited to MySuper products.
While this process faces a number of challenges, some simple steps will help ensure success in both the implementation of the process and outcomes for members.
Graeme Samuel’s forensic examination of the prudential regulator’s capability last year revealed that APRA to needed to be better resourced and that many divisions were running on the smell of an oily rag.
AIST understands that there is only a handful of people working on data collection in superannuation, which potentially involves more than 40,000 products in the Choice sector. Compared to other regulators, APRA continues to be under-resourced.
As the Productivity Commission has emphasised in its recent industry reviews, data will play an increasing role in the regulation of superannuation. AIST believes there needs to be a more structured, co-ordinated and collaborative approach to the collection and analysis of data across the regulators. The ATO has a very large pool of data skills but these resources are not sufficiently drawn upon by APRA.
There is both concern and scepticism across the financial services sector that APRA will be able to benchmark performance and other features of Choice products, particularly when the industry and the regulator is still grappling with challenges involved in collecting meaningful and comparable data across the 90 or so MySuper products. Earlier this month, University of NSW academic Scott Donald suggested APRA should abandon plans to assess the full range of Choice products available on the market because its resources would be better spent elsewhere.
But this is no reason to give up shining a light on Choice and let the providers of poor products off the hook.
AIST believes the financial services industry has a duty to consumers to get behind the heatmap and find ways to make it happen, not ways to make it stop. The heatmap is not perfect and issues of comparability are endemic but concerted action to improve data has the potential to deliver tangible consumer benefit.
Many in our industry were initially sceptical that ‘real time’ contributions reporting to the ATO could be achieved in a relatively short implementation timeframe. It’s now firmly in place, providing a high level of disclosure and, importantly, enormous benefits for members that include reducing unpaid super.
There are seven categories of data that APRA wants to collect from funds for its benchmarking, including net performance fees and insurance data. AIST has suggested that the regulator establish separate industry working groups for each data category to be overseen by an industry steering committee.
Even with the short time to extend the choice data collection, the Choice heatmap is unlikely to be published by APRA until early to mid-2021. This is years after countless reviews and research papers have highlighted the poor outcomes for members of Choice products.
Throughout the royal commission hearings, Commissioner Hayne spoke about the need for financial service providers to meet community expectations. When it comes to super fund performance, this surely includes providing members of all super products with enough information to make an informed choice.
Any fund that can’t provide this data to the industry regulator should perhaps consider if it should be operating at all.
