assessing our performance

As a fund created to deliver the outcomes our members need and want, our member focus is central to who we are. Our structure, our operations and our leadership are all informed by our members and their work. Their needs drive every part of our strategy, our brand and our culture.

HESTA has assessed each of the products we offer:

• our HESTA MySuper product (Balanced Growth) for super members
• our Choice (accumulation) product for super members
• our Choice income stream products (transition to retirement income stream and retirement income stream products, including our term allocated pension).

In conducting our comparative analysis, we benchmarked our products (excluding the transition to retirement income stream¹) against other products in the market.

The analysis also took into account our deep understanding of our members’ characteristics. The unique characteristics of our fund inform our strategy and enable us to connect with our members through personalised communication. 

To ensure everything we do as a fund continues to be in the best interest of members, we’re required to assess our performance annually against a range of key factors including:

• investment strategy, performance and risk
• the APRA Performance Test (MySuper)
• insurance strategy
• fees and costs 
• the various benefits and options we offer, and
• the scale and size of our business.

In assessing outcomes for members, we’ve drawn a balanced comparison of products and services provided by other funds using publicly available data from the Australian Prudential Regulation Authority (APRA) and independent ratings agencies such as Chant West and SuperRatings. 

¹ Part way through the assessment period, on 1 October 2020, the transition to retirement income stream (TTR) investment options were closed and aligned to those in the Choice (accumulation) investment options. This change was designed to streamline and align our investment options available in our taxed investment portfolio. Benchmarking against peers for TTR products is currently not possible due to the lack of available data to compare TTR products. 

Through our analysis, we have determined that the financial interests of members are being promoted for our products.

This is great news for our members. The thorough analysis we’ve undertaken shows their retirement savings are in safe hands.

In fact, HESTA members continue to be some of the most engaged super members in Australia – so they’re taking as keen an interest in their super as we are in taking care of it!

And they’re also some of the most tech savvy, as significantly more HESTA members receive electronic or mobile communication from us than members of other funds. They’re also great at checking in on how their super’s going, with the majority choosing to receive their statements online.

Investment strategy and performance

We aim to deliver solid, long-term returns, and we achieve this by investing in a way that supports healthy returns, healthy people, and a healthy planet we can share with future generations.

Every aspect of our investment strategy is informed by our focus on investing for strong long-term returns and doing it responsibly, knowing the importance of each decision to our members’ future financial health.

Our HESTA MySuper product (Balanced Growth), is designed with our members’ needs in mind. It’s invested in a diverse but balanced mix of assets to align with the long-term nature of super. It aims to provide high enough returns over the long term to help them achieve a more comfortable retirement lifestyle. Most of our members are invested in Balanced Growth.

The outcomes of a review of our Choice investment options were implemented in October 2020. The changes were driven by a desire to simplify choice for members, ensure naming conventions of our investment options were true to label and align Choice investment options across products to minimise the complexities of transitioning between accumulation and income stream products.  

These changes strengthen our investment menu. Based on the performance of investment options in our products against comparable products in the market, HESTA has determined that the investment strategy in the HESTA MySuper, HESTA Choice (accumulation) and HESTA Choice (income stream) products remains appropriate for those members.

Key results

Fees and costs

The analysis finds that the setting of fees on a cost recovery basis is appropriate for members currently invested in HESTA products.

For this assessment period, all fees charged to HESTA member accounts are set on a cost recovery basis. They are deducted from member accounts and retained in fund reserves to cover expenditure for the benefit of all HESTA members (and in accordance with reserving policies).

Key results

Services and benefits

HESTA services are appropriate when compared with those of equivalent funds and are well-used by members. In reaching this finding, we’ve also considered the fees and costs charged to HESTA members to pay for the provision of these services.

Services provided by HESTA are available to all members regardless of the product they hold. These include:

• access to professional financial advice
• education including member education sessions, calculators and webinars.
• communications including statements, campaigns, member updates and information on relevant superannuation changes
• online services including HESTA Member Online
• contact centre.

Insurance strategy and fees (HESTA MySuper and Choice accumulation only)

Our analysis finds that, taking into account the characteristics of the members in our accumulation products, our insurance strategy and fees remain appropriate for those members.

Our insurance benefit design carefully considers our members’ needs.

The majority of our members hold Standard Cover, which is:

• Death Cover
• Income Protection Cover

We are one of only a minority of super funds to offer income protection as Standard Cover because we find it leads to more members overcoming temporary disabilities and getting back to work faster. Total and Permanent Disability Cover is available as voluntary cover only.

Our Standard Cover is designed to provide a basic level of insurance that:

• reflects members’ likely income and
• has a fee structure that helps protect members with low account balances.

The insurance benefit design also has the flexibility to meet more specific insurance needs that may not be met by the Standard Cover. This includes the ability to increase cover without having to provide full medical evidence, in some instances.

In March 2021, in response to the increasing cost of group insurance premiums, we changed the default Income Protection offer from an ‘up to age 67’ benefit payment period, to an ‘up to 5 year’ payment period. This allowed us to maintain affordable insurance for our members.   

• Chant West rates the HESTA insurance offering as high quality.
• Insurance fees charged to members do not inappropriately erode their account balances.
• The level of claims paid out for each type of insurance cover is within an acceptable range.

Scale and size of business operations

The trustee has determined that the scale and size of HESTA’s business is an advantage for our members.  It allows us to provide services to members at low or no additional cost.

When compared against most funds in the market HESTA performs better than the benchmark in most metrics:

• operating expense per member ($141) is lower than the median ($272).
• HESTA membership growth is above the median as compared to other funds.
• net benefit to MySuper members demonstrates outperformance over the median recorded over one and five years.

HESTA continues to grow, which means investment fees naturally decline over time as funds available for investment increase. This enables our investment team to leverage our size and reputation in negotiating lower fees with external managers.

With over 930,000 members and close to $68 billion in assets, we can use our scale and size to deliver great value to all our members.

Determination for the period ending 30 June 2021

MySuper product determination

• The financial interests of members are being promoted by the Trustee.
• Fees and costs for a representative member ranked above the median versus comparable MySuper products.
• Returns (after fees and costs) ranked above the median versus comparable MySuper products.
• APRA’s MySuper performance benchmark of -0.5% was passed with a score of 0.19%.
• Services and benefits available to members in the HESTA MySuper product are appropriate for those members.
• The investment strategy applicable to members in the HESTA MySuper product remains appropriate for those members.
• The insurance strategy applicable to members in the HESTA MySuper product remains appropriate for those members.
• Insurance fees charged to members in the product do not inappropriately erode the retirement income of those beneficiaries.
• Insurance claims admittance rates are at acceptable levels to ensure members can claim on the insurance cover they hold. 
• The scale of HESTA business operations does not disadvantage those members in the HESTA MySuper product.
• Operating costs of HESTA’s business operations do not disadvantage those members in the HESTA MySuper product.
• The basis for the setting of fees at cost recovery is appropriate for those beneficiaries in the HESTA MySuper product.

Choice product determination (accumulation and income stream)

• The financial interests of members are being promoted by the Trustee.
• Fees and costs for a representative member largely compare favourably against comparable products (excluding transition to retirement income stream).
• Returns (after fees and costs) largely compare favourably or in line with general market median against comparable products (excluding transition to retirement income stream).
• Services and benefits available to members are appropriate for those members.
• The investment strategy applicable to members remains appropriate for those members.
• The insurance strategy applicable to members remains appropriate for those members (accumulation only).
• Insurance fees charged to members in the product do not inappropriately erode the retirement income of those beneficiaries (accumulation only).
• Insurance claims admittance rates are at acceptable levels to ensure members can claim on the insurance cover they hold (accumulation only). 
• The scale of HESTA business operations does not disadvantage members.
• Operating costs of HESTA's business operations do not disadvantage members.
• The basis for setting of fees at cost recovery is appropriate.