The first Choice heatmap released by APRA in December revealed that 60 per cent of Choice products had delivered returns below the regulator’s benchmarks.

“APRA will continue to closely monitor and take firm supervisory action on underperforming Choice products ahead of the expanded performance test in 2022,” the regulator said.

APRA noted that its strategic focus was to improve member outcomes and eradicate underperformance, supported by the annual heatmaps and the Your Future, Your Super performance test.

Thirteen super funds were found to have failed the inaugural performance test last year, and APRA said that it had subsequently intensified its supervision of these funds and had asked them to report on the causes of underperformance and how they will be addressed.

The regulator also said that it is engaging with registrable superannuation entity (RSE) licensees that are at risk of failing the next performance test to ensure they take steps to improve their performance and understand their contingency plans.

“Over the year, this work, coupled with effective supervisory actions, has led to an increase in merger activity across the industry, with 12 mergers completed and a further 12 RSE licensees in initial or advanced execution phases”, APRA noted.

Amid the pandemic, APRA said that super funds had responded to operational challenges arising from lockdowns and the challenging business environment “relatively well”.

“Overall, the superannuation industry continued to provide strong returns to members over the year despite the ongoing economic uncertainty associated with the pandemic,” it said.

“The primary driver of this performance was the continued buoyancy of the financial markets, resulting in double-digit investment returns.”

APRA also pointed to a number of other major developments that have taken place across the industry during the past year, including the consolidation of member accounts.

“Across the superannuation industry, member accounts continue to be consolidated as a result of recent legislative reforms,” APRA said.

“The reduction in the number of member accounts has resulted in better outcomes for members overall, but has also resulted in cost pressures for RSE licensees. These pressures are likely to continue into 2022 and beyond.”

The Australian Institute of Superannuation Trustees (AIST) has recommended that the Your Future, Your Super performance test be extended to all APRA-regulated super products as part of its pre-budget submission.

“The scope of the YourSuper comparison tool is only about ‘some of your super’: the AIST proposal is for an AllYourSuper comparison tool that would provide a demonstrable benefit for almost all Australians,” said AIST chief executive Eva Scheerlinck.

The super industry body also called on the government to assess the level of financial coercion experienced by fund members, particularly women, through the early release of super scheme and to extend super to paid parental leave.

“Bumper super returns in 2021 are good news for those who benefit but the figures disguise the fact that many Australians are being left behind in their retirement,” said Ms Scheerlinck.

“Although our retirement savings system is among the best in the world, the government has a great opportunity with the next budget to ensure it works to the benefit of all Australians, regardless of their gender, culture, education or socio-economic background.”